Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina

Mark Weisbrot has been arguing, for some time now, that Greece must try to emulate Argentina; that is, to default on its debts not as a bargaining strategy that yields a New Deal within the Eurozone but, rather, in the context of exiting the Eurozone altogether and going it alone. Recently, Paul Krugman has endorsed this position (see here and here). I think they are profoundly wrong.

There are two arguments against the recommendation that Greece and Argentina are similar enough to warrant an Argentinian road for Greece. There are those, like the Cato Institute and IMF diehards, who never forgave Argentina for having successfully escaped the clutches of the poisonous austerity (and internal devaluation) that the IMF had imposed upon the country so as to sacrifice a whole people’s prosperity in the interest of creditors, rentiers and assorted speculators who had flooded the country with dollars (during the era of the currency board). Believe me when I say that I am not one of them. Indeed, I salute the Argentinian people for having toppled a regime, and more than one government, that tried so desperately to sacrifice a proud people on the altar of IMF-led austerity. No, my criticism of the idea that Greece can ‘do’ an Argentina today stems from the view that the circumstances Greece is facing today are genuinely different to those of Argentina a decade ago.

The differences between the two cases, which render the analogy redundant, are three:

1st difference: The potential of exports to act as shock absorbers

Weisbrot and Krugman point out, correctly, that at the height of Argentina’s crisis, its exports (as a percentage of GDP) were not very different to those of Greece. Based on this argument, they dismiss the idea that Argentina managed to recover after its default-devaluation by means of export-led growth.

While it is quite true that Argentina’s export performance in 2001 was by no means better than Greece’s today, it is crucial to note that Argentina’s export potential in 2001 was vastly superior to that of Greece’s in 2012. By export potential I mean the degree of underutilisation of productive resources whose employment can, potentially, produce goods and services for which there is effective demand. In 2001, Argentina’s farms were woefully underproducing primary commodities that were, at that time, seeing their demand skyrocket. In sharp contrast, idle productive resources in Greece cannot produce much for which there is increasing demand.

Take for instance shipping and tourism, mentioned by Paul Krugman as two potential sources of Greek export growth: Both are in speedy decline! Additionally, whereas in the case of Argentina, its next door neighbour (Brazil) was entering a period of rapid growth, Greece’s neighbours are showing no such signs of vitality. Indeed, our traditional trading partners are also buffeted by recession (pushing down the demand for Greek tourism) while non-EU countries (such as Russia) cannot, and will not, make up the difference to any appreciable degree.

Lastly, on this note, Weisbrot and his co-author Juan Antonio Montesino argue that Argentina’s growth was not ‘export’ driven, noting that only 12% of its GDP growth during the 2002-8 period can be accounted for by exports. With all due respect, I fear that such a pronouncement cannot be made lightly. For it is impossible to separate neatly the effects on GDP of exports from the effect of internal aggregate demand when we take into account the fact that internal demand relies entirely on ‘animal spirits’ (i.e. on the optimistic expectations) of investors into goods intended for local consumption. Put simply, the emergence of strong Chinese demand for Argentinian soy, beef etc., in conjunction with the growth of neighbouring Brazil, has had a major impact on the readiness of Argentinian investors to invest in activities that also generated internal demand. In short, that 12% quoted by Weisbrot is simply a gross underestimate.

2nd difference: Greece has no peg with the euro. It has the euro!

Analysts like Krugman, Weisbrot and Rubini make the utterly good point that Greece would benefit enormously from a devaluation of its currency. Of course it would. Argentina does, indeed, provide a brilliant example of how a massive devaluation can help a country escape a debt-deflationary cycle. As, for that matter, does Iceland. However, what they are neglecting is that it is one thing to break a peg linking your currency to some other hard currency (as in the case of Argentina), or to devalue your floating currency (as did Iceland), and quite another to have no currency but to have to create one from scratch.

In the case of Argentina the peso was in existence. All it took to devalue it was to announce that the 1:1 peg with the dollar was over. Suddenly ALL incomes and ALL savings were devalued by the same percentage. Overnight. End of story. It was not pleasant but it could be done. In the case of Greece it simply cannot. And this makes a world of a difference. Why? Because of two important reasons. First, because of the crushing delay in introducing a new currency. Secondly, because of what I call the bifurcation between the stock of savings and the flow of incomes. But let me take these one at a time.

Delay: Bank of Greece colleagues tell me that it will take months before ATMs are stocked with new drachmas once they get the go ahead to print them. Even if it takes weeks, an economy cannot remain un-monetised for so long, especially when already on the canvass of a deep crisis, without major civil unrest and an almost terminal effect on economic activity.

Bifurcation: Even ignoring the crippling effects of the delay, we must not forget that the ongoing crises has led Greek savers to withdraw oodles of their savings from Greek banks and either shift them offshore (London, Geneva, Frankfurt) or stuff them in their mattresses, or hide them in their freezers (in ‘bricks’ of  500 notes).  This means that, by the time we come to an exit from the euro, the stock of savings will be in euros and the flow of incomes and pensions (once the banks re-open) will be in drachmas. So, unlike in Argentina, a Greek euro-exit will drive a wedge between stocks and flows, savings and incomes; with the former revaluing massively relative to the latter. Moreover, the very availability of such large quantities of ‘hard’ currency savings, in the hands of the average Dimitri and Kiki on the street, will ensure that the decline in the value of the new drachma will be precipitous (something that did not happen in Argentina since most savings were in pesos also).

In short, even if we neglect the devastation caused by the delay in the introduction of the new currency (something Argentina did not have to worry about), the new currency will be debased ever so quickly due to this bifurcation, leading to hyperinflation and the loss of most of the competitive gains we might have hoped for from the devaluation.

3rd difference: Greece is perfectly capable of poisoning the water it is swimming in (Europe)

When Argentina defaulted and broke the peg, the ill effects on its trading partners (China, Brazil etc.), as well as on the broader macro-economy in which it was functioning, were negligible. If Greece leaves the euro, however, the results will most certainly prove catastrophic for our ‘economic ecology’, and in a never-ending circle of negative feedback, will bite our struggling nation back.

To begin with, Greece must exit not only the Eurozone but also the European Union. This is non-negotiable and unavoidable. For if the Greek state is effectively to confiscate the few euros a citizen has in her bank account and turn them into drachmas of diminishing value, she will be able to take the Greek government to the European Courts and win outright. Additionally, the Greek state will have to introduce border and capital controls to prevent the export of its citizens euro-savings. Thus, Greece will have to get out of the European Union.

Setting aside the domestic ramifications over loss of agricultural subsidies, structural funds and possibly trade (following the possible introduction of trade barriers between Greece and the EU), the effects on the rest of the Eurozone will also be cataclysmic. Spain, already in a black hole, will see its GDP shrink by more than Greece’s current deflationary record rate, interest rate spreads will tend to 20% in Ireland and in Italy and, before long, Germany will decide to call it a day, bailing itself out (in unison with other surplus countries). This chain of events will cause a bitter recession in the surplus countries clustered around Germany, whose currency will appreciate through the roof, while the rest of Europe will sink into the mire of stagflation.

How good will this environment be for Greece? I submit it to you, dear reader, that the answer is: Not good at all!

In short, whereas Argentina’s and Iceland’s successful default-devaluation strategy did not have adverse effects on the overarching environment in which they had to exist after their bold move, a Greek euro-exit will be the equivalent to poisoning the pool in which we must swim.

Epilogue

Does this mean that Greece ought to grin and bear the massive and misanthropic idiocy of the bailout-austerity package imposed upon it by the troika (EU-ECB-IMF)? Of course not. We should certainly default. But within the Eurozone. (See here for this argument.) And use our readiness to default as a bargaining strategy by which to bring about a New Deal for Europe (in a manner that I have written about here).  

165 thoughts on “Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina

  1. Why is it socialists (And I use the term “socialist” with the same respect in which they hold my views) believe they can change the reality of a situation if they simply spend enough taxpayer money? A Greek default? Its not an option, it is reality, the Greek government cannot pay its bills, it should default, no amount of taxpayer money is going to change the fact that the Greek government taxes too much, regulates too much and spends too much. To try an alter the perception of reality is expensive and to state the obvious it does not change the fundamentals. To change the fundamentals you have to deal with the fundamentals and the first step in this process is to put the Greek government out of business and free the Greek people from an oppressive political regime that is bleeding them dry and is being propped up by socialist politicians and fascists corporations in Europe.

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  4. Revival on the Head of a Pin: Do U Pari Passu?

    Argentina and its most intransigent creditors are duking it out again (or still) in the Second Circuit, reviving the crazy battle over the meaning and import of the pari passu (equal treatment) clause in sovereign debt contracts. For the small but committed contingent of pari passu pointy heads, this is WorldCupOlympicMarchMadnessSuperBowl. For everyone else, this bears watching because an obscure turn in the Argentina story could open the door to enforcement against sovereign debtors in general. (Nope, this is not a closet Eupdate. Pay no attention to the man behind the blue-striped curtain.)

    Recap: Argentina defaulted on roughly $100 billion in debt in 2001, then restructured about three-quarters of it in 2005 with a 60%++ haircut, depending on how you count. In 2010, it mopped up most of the rest. However, a small subset of expert holdouts keeps on suing, lobbying, and trying to collect by any means necessary. Last December, the long-suffering SDNY Judge Griesa ruled that the Republic breached the pari passu covenant in its debt contracts by (a) paying the holders of its restructured bonds but not the holdouts, and (b) passing a “Lock Law” that bars the government from paying the holdouts. On February 23, the judge issued an injunction, telling Argentina to pay the holdouts pro rata whenever it pays the holders of its restructured bonds. Argentina has appealed, pointing out among other things that paying people who took a massive haircut on par with those who took none was not exactly equal or equitable. This week, the U.S. Government filed a Statement of Interest, joining the New York Fed and the New York Clearing House at a friend-filled party.

    For those who care about neither Argentina nor pari passu, this matters because a broad reading of the February 23 SDNY order would subject countries who pay some creditors, but not others, to injunctions of the sort just slapped on Argentina. Creditors who get paid while the holdouts are not, or even intermediaries routing payments for the debtor, might be exposed as well. Pari passu clauses are ubiquitous in New York and English law sovereign bonds. Since successful sovereign debt exchanges so far have all relied on a credible threat of stiffing non-participants, upholding the order could spell the end of the prevailing restructuring regime.

    A narrow reading of the order would tie the injunctive remedy much more closely to Argentina’s “Lock Law.” The law can be read as a formal subordination of the holdouts (as distinct from selective payment)—a breach of the pari passu covenant under a reasonably conservative reading of the clause. Because this law is unusual, this would at least limit the effect of the order on the foreign sovereign debt market. But even a narrow reading would not solve the problem raised most forcefully in the U.S. Government brief—that the injunction would give creditors a worldwide remedy beyond the scope of the Foreign Sovereign Immunities Act.

    Now some might say that upholding the SDNY order, even broadly, would not be a bad thing: it would jolt a screwed-up legal regime, and might prompt sensible reform. The alternative appears to be effective impunity for sovereigns that, like Argentina, can afford to pay the nuisance tax of never-ending enforcement litigation, and bear what reputational cost it does in the markets. The argument obviously loses force with poor countries that cannot afford to stay out of the markets and live in court for a decade, and must choose between clean water and holdout creditors. Others might say that Argentina’s continuing travails and the revival of pari passu as an enforcement device illustrate the cost to the international system of having no sovereign bankruptcy regime.

    Few would rally behind the status quo as first best, not by a long shot. Even if the SDNY order is overturned as totally wrong (as I think it is), there is something quite dysfunctional about a market where the contracts do not map onto the background legal regime. Normal-looking clauses turn into arrant nonsense when you stick them in sovereign IOUs. This is because private debt contracts are presumptively enforceable (even if not always enforced), and can be restructured in bankruptcy. Substituting immunity for bankruptcy in the sovereign context destabilizes, and occasionally eviscerates, the meaning of the contract text.

    Pari passu is the poster child for this proposition: because sovereigns cannot file for bankruptcy, there is never a moment of agreed insolvency or a waterfall of asset distribution. Instead, creditors owed on Monday might get paid, but those owed on Thursday might not. Is that subordination, or luck of the draw? The one agreed way to breach the covenant is to shout out “I subordinate”—but who does that?? (OK, maybe Argentina … I don’t think the Greek “Retro-CAC” Law is comparable.)

    The biggest mystery, given such apparent dysfunction, is why the brilliant lawyers who draft sovereign debt contracts don’t just fix pari passu once and for all, so that it would make sense. Smart people have offered thoughtful explanations. I suspect the answer has something to do with the dissonance of writing a totally, utterly, certainly unenforceable debt contract. That’s just not what lawyers do—or is it?

    Finally, there is a weird political/PR dynamic at play here. Argentina and Greece, represented by the same law firm and threatened by the same holdout creditors, have apparently conflicting PR strategies. For Argentina, the key is to hitch its case to the European caravan, so everyone thinks that a ruling against Argentina would bring on global financial apocalypse. Hence the reference to Greece, Portugal, Spain, and Ireland as potential victims in the Argentina brief. In contrast, the last thing Greece wants is to have the spectre of Argentina hover over its still-pending debt exchange. The holdouts want some combination of both — they want Greece to feel threatened by the potential outcome in Argentina, but not so threatened that the U.S. and the EU establishment get scared too, and join the battle full force on Argentina’s side.

    All this for pari passu? Stay tuned for geek party of the century.

    Revised to reflect the fact that the New York Fed did not file on appeal this time. It did file in a very similar case involving the same parties in 2004. Argentina refers to this earlier position in its 2012 brief.

    http://www.creditslips.org/creditslips/2012/04/revival-on-the-head-of-a-pin-do-u-pari-passu.html

  5. Let’s say the leaders of Europe have no appetite for solutions suggested like yours? (I haven’t seen any real appetite yet for true solutions)
    So let’s say Greece defaults as your epilogue suggests. Let’s say the Troika walk away from Greece and European leaders still haven’t picked up on your solution.
    Firstly, do you think this outcome could happen?
    If it did happen then what would you suggest next for Greece? and for other countries?

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  8. Yannis, you mentioned that Greece -should the country declare bankruptcy and leave the euro – will poison the water it is swimming in. However, there is another side to this. A handful of devastated and bankrupt countries can support each other politically and economically. Likewise, the international community and the market will fully grasp the fact that the euro – as it was structured – was a recipe for disaster. So the punishment for these countries may not be severe.

  9. re: Lygeros comment by Dean. Even I – with a hen’s IQ – I am aware that our mineral wealth is a powerful negotiating tool and the example of Cyprus as the way forward is all over the FB including mine since the successful bid.All governments up to now were aware…hence they decided to give the country away!!!Otherwise, securitizing the rights for half a century or less they would have bailed the country out.But they would not please Mrs.Merckel…Remember all we have belongs to the ones who countersigned the agreement in case of default so any AOZ step is a step to be taken before we claim anything or we resist even in a theatrical attempt to default.
    re: Tourism and Shipping.Don’t count too much on shipping and tourism.Unfortunately the people aspiring to power now have a rare ignorance -at least about one- of these issues as evident in their published intentions…I hope it is the exception otherwise I prefer to sleep and wake-up half a century later…

    • @Y-patia

      First of all, Greece is not anywhere near self-sufficient in either energy or food. This matters. Secondly, its industrial base is nearly non-existent. Thirdly, even with natural resources (such as oil, gas or minerals), the economic management of these is not so straightforward as to translate into a successful economy with high employment and equitable income distribution. There are many countries rich in natural resources that fail to use them for the benefit of their population. One such is Nigeria — and I suggest to you that in management style, Greece is closer to Nigeria than to Norway.

      My take on this is that Greece needs the EU and the euro. Its economic trajectory otherwise would have been (and would be) dismal — even though membership of the EU has brought many problems to Greece.

    • “First of all, Greece is not anywhere near self-sufficient in either energy or food. This matters. Secondly, its industrial base is nearly non-existent. Thirdly, even with natural resources (such as oil, gas or minerals), the economic management of these is not so straightforward as to translate into a successful economy with high employment and equitable income distribution.”

      Thats complete rubbish!

      1. Greece is completely self-sufficient in its production of electricity! Thats good!
      We just need fuel imports for transportation and heating but not for electricity production!
      If we exploit our own ressources in our EEZ we will be completely self sufficient on energy!

      2. Food: Greece is importing food just because of the negative effects of EU subsidies on our agriculture. This can be reversed within a year or maximum two and Greece could become self sufficient on food and a net exporter of food!

      3. Industrial base is nearly non-existent! WHY IS THIS MR. XENOS? Ask this question first before you jump to conclusion here.
      I will give you the short version of the answer: Greece has been de-industrialized because of the EEC, the EU, the ERM and the Euro! If we reverse the impact of these institutions by leaving the Eurozone the industrialization of Greece will again happen!

      You don’t need to believe me and what I say! Read what Professor Pelagides was saying about these negative effects already in the 90’s!

      http://www.ces.fas.harvard.edu/publications/docs/pdfs/CES_WP46.pdf

      Besides, high interest rates are not only kept artificially high in order to
      attract capital and compensate for low state revenues, but also because of the need to prepare the national currency to formally enter the European Exchange Rate Mechanism (ERM) and keep up with Maastricht obligations regarding the creation of a common European currency (ECU) and so, as is believed, fight inflation. First of all, a high degree of exchange rate fixity requires correspondingly high levels of real interest rates, which further speeds-up the debt accumulation process both directly by increasing the interest payments on debt, and indirectly by reducing the demand for high-powered money and the growth rate of output (Papademos 1993: 153-154). Thus, this policy keeps the deficit at high levels and balloons debt, while at the same time, high interest rates hit the real economy and bring on economic ine11ia as the increase of GDP can not counterbalance high interest rate payments. Moreover, this has the result of an increase in the average rate of state services in order to cover the deficit. and it leads to an increase in prices and inflation. Inflation today remains around 15% and a recent tendency to fall by 2-3 points rapidly overturned by a need to increase taxes (from 22.3% of GDP in 1989 went to 27.2% in 1992) in order to cover an unexpected high deficit in the end of 1992. The fight against inflation does not take place neither by keeping the drachma parity high because a “hard currency” policy weakens trade balance. From -1l.9 as % of GDP deficit in 1988. trade balance grew at 15.8 % in 1992 (OECD 1993a: 71) and thus. deterioration continues. \Vhile the trade deficit is growing. the artificial nominal drachma parity is seriously undermined, while sentiment about the drachma is dominated by the performance and prospects of the current account. Then. real parity falls off due to growing trade deficits, reinforcing market speculation over the national currency and keeping inflation at high levels. despite the fact that economy is in an unprecedented deep recession.

      !!! This policy, combined with excess disabsorption by highly restricting domestic demand, had as an outcome even more catastrophic results on the real/industrial economy. The fall off in domestic demand reduced the size of the domestic market and diminished economies of scale for enterprises, increasi ng the per unit cost -and fUlthermore boosting inflation once more. Enterprises, even those with much potential, find it always more difficult to compete in the international market arena when imports are su bsidized \’ ia the undervaluation of the f?reign currency while, at the same time, expolts are taxed by an “expensive drachma”. As a result, they find only one way to restore competitiveness through the BlustonianHarrisian (1988, 1990) “low road restoration of profits” which is based on low ,,,,age labour force, and restores competitiveness in the short-term, but definitely undermines it in the long-term by lowering investments and preventing technological change (Cohen and Zysman 1987, Pelagidis 1989. 1993). It is estimated that only as a result of further wage cuts alone, there has taken place a sharp increase in Greek profitability of up to some 80% since 1990 (Barkleys 1993: 3), without actually increasing…….

      and this as well:

      Authors who support “hard currency” policy believe that in any other case inflation will boost again, especially the “imported onc’! and then it would not be possible to bring down interest rates. We must mention at this point that:
      a) it is very possible that in the case that we let the currency slide accordi ng to market signals. foreign competitors will keep prices down so as not to lose their domestic market share and. b) by letting the currency find its true equivalence, we make exports more competitive and so increase production. thus compensating for the undervaluation and counterbalancing inflation expectations coming from
      it by enforcing production and improving trade balance.

      !!!!! Moreover. exchange rate parity should follov more closely the currency fluctuations of those countries which especially produce goods competitive to Greece, like Spain, Portugal and Ireland so we can efficiently support national competitiveness. Therefore, although exchange rate policy is a vcry delicate matter and a very sensitive one and thus careful movements need to be made. a selective, differentiated and gradual sliding of the national currency is what this paper proposes for the time being!!!!!!!!!

    • @Aristoteles

      Excuse me, but what I have written is correct. I have not gone into details, but your claims are wrong since Greece is not even self-sufficient in electricity.

      I have been studying and publishing on aspects of the Greek economy since 1987, and I do not need to read the opinions of junior professors such as Pelagides. I shall not comment here on how most Greek academics get their posts, either.

      Anyone who advocates either leaving the euro or the EU is just ignorant of the precise situation of the Greek economy or possibly of economic reality more generally. The cost of euro exit would have been rather less two years ago, and its threat would also have been a strong negotiating position. The useless Pasok administration under Papandreou (the one that Pelagidis has supported) failed Greece; now is too late to exit. Long sentences of jargonistic pseudoscience cannot alter the basic economic facts, however much you would like that to be so.

  10. “Take for instance shipping and tourism, mentioned by Paul Krugman as two potential sources of Greek export growth: Both are in speedy decline!”
    That the Greeks manage to ruin those industries doesn’t mean those sectors don’t have potential. And at least for tourism, there’s more hope for that industry in the environment of an independent currency than inside the Eurozone, ain’t that correct?

    “Greece’s neighbours are showing no such signs of vitality.”
    Turkey, not vital enough for you? Huh?

    “Even if it takes weeks, an economy cannot remain un-monetised for so long”
    In the meantime, the Euro will still be there, until the transition date, of course. The Germans managed to switch from the Reichsmark to the Deutsche Mark in this way, with very positive results. Of course, that won’t be as successful for the Greeks, but it can be done.

    “Even ignoring the crippling effects of the delay, we must not forget that the ongoing crises has led Greek savers to withdraw oodles of their savings from Greek banks and either shift them offshore (London, Geneva, Frankfurt) or stuff them in their mattresses, or hide them in their freezers (in ‘bricks’ of 500 notes).”
    Even more reason to hasten the transition now, before all the wealth has left the country. Plus, once people have to pay for their consumption with a new Drachme, those Euros parked elsewhere will return step by step, and thus improve the current account and the exchange rate. Those offshore savings may prove to be a very important nest egg and not a problem at all.

    “For if the Greek state is effectively to confiscate the few euros a citizen has in her bank account and turn them into drachmas of diminishing value, she will be able to take the Greek government to the European Courts and win outright.”
    Which EU laws prohibit higher taxation of wealth and/or transferring accounts at national banks from one currency to another, based on democratic decisions?

    “Additionally, the Greek state will have to introduce border and capital controls to prevent the export of its citizens euro-savings.”
    Why shouldn’t this be negotiable with the other EU partners, as a temporary measure to ease the transition? You’ll probably find that the others are very willing to give Greece a lot of legal headroom in order to ensure their Eurozone exit.

    “I recognise that in order to have leverage during negotiations, the EU leaders must have the impression that we can do otherwise.”
    Correct. And there’s actually nothing the Greece government (if there was a working one, which isn’t the case now) could do to make the negative experiences of the last years disappear. Face it, there’s no confidence left anymore. And this will have consequences. To be in denial of reality doesn’t help you. The only way left is out of the door of the Eurozone. To say it with a quote from “Blues Brothers”: You don’t have to go home (= leave the EU), but you can’t stay here (in the Eurozone). That’s no big deal. When a relationship doesn’t work, a clean divorce is the best option for everybody involved. All the best, and don’t let the door hit you.

  11. “Take for instance shipping and tourism, mentioned by Paul Krugman as two potential sources of Greek export growth: Both are in speedy decline!”
    That the Greeks manage to ruin those industries doesn’t mean those sectors don’t have potential. And at least for tourism, there’s more hope for that industry in the environment of an independent currency than inside the Eurozone, ain’t that correct?

    “Greece’s neighbours are showing no such signs of vitality.”
    Turkey, not vital enough for you? Huh?

    “Even if it takes weeks, an economy cannot remain un-monetised for so long”
    In the meantime, the Euro will still be there, until the transition date, of course. The Germans managed to switch from the Reichsmark to the Deutsche Mark in this way, with very positive results. Of course, that won’t be as successful for the Greeks, but it can be done.

    “Even ignoring the crippling effects of the delay, we must not forget that the ongoing crises has led Greek savers to withdraw oodles of their savings from Greek banks and either shift them offshore (London, Geneva, Frankfurt) or stuff them in their mattresses, or hide them in their freezers (in ‘bricks’ of 500 notes).”
    Even more reason to hasten the transition now, before all the wealth has left the country. Plus, once people have to pay for their consumption with a new Drachme, those Euros parked elsewhere will return step by step, and thus improve the current account and the exchange rate. Those offshore savings may prove to be a very important nest egg and not a problem at all.

    “For if the Greek state is effectively to confiscate the few euros a citizen has in her bank account and turn them into drachmas of diminishing value, she will be able to take the Greek government to the European Courts and win outright.”
    Which EU laws prohibit higher taxation of wealth and/or transferring accounts at national banks from one currency to another, based on democratic decisions?

    “Additionally, the Greek state will have to introduce border and capital controls to prevent the export of its citizens euro-savings.”
    Why shouldn’t this be negotiable with the other EU partners, as a temporary measure to ease the transition? You’ll probably find that the others are very willing to give Greece a lot of legal headroom in order to ensure their Eurozone exit.

    “I recognise that in order to have leverage during negotiations, the EU leaders must have the impression that we can do otherwise.”
    Correct. And there’s actually nothing the Greece government (if there was a working one, which isn’t the case now) could do to make the negative experiences of the last years disappear. Face it, there’s no confidence left anymore. And this will have consequences. To be in denial of reality doesn’t help you. The only way left is out of the door of the Eurozone.

  12. 1) As far as the export potential is concerned I will touch tourism and shipping like you did. Greek tourism is privileged to be equipped with wonderful islands and seas, an ideal weather, the Greek historical and cultural heritage and a strategic position between three continents. We extend the tourist season, covering the rest of the year and taking advantage of the Mediterranean climate. Alternative forms of tourism include climbing, sports tourism, medical tourism, astronomical and cultural tourism. Greece has more to offer than just “sun and sea” which highlights the intense seasonality of our tourism. The lack of tourism infastructure and skilled manpower is rather obvious. The deficiencies in land, water and air transport infrastructure are well known. We should provide superior quality services and to differentiate them by increasing the supply of services for special interests (e.g. fishing and diving tourism) and to improve the image of the tourist product. Regarding shipping, as a maritime nation, we should consider policies that strengthen the maritime cluster by developing additional services to shipping, as banking, insurance services (e.g. P & I clubs) and intermediaries (e.g. freight forwarders and brokers used boats – cargo & vessel brokerage services).Moreover, the development of port and shipbuilding infrastructure, the expansion of cooperation with port facilities management companies and the attraction of shipping lines (container shipping companies) may contribute to increased revenues from additional services to shipping. Just imagine how many cruise ships we could attract by building some piers and modern marinas. Countries like Germany, USA, Japan and the BRIC (mainly Russia and China) would make great trading partners. Iceland’s exports spiked in 2011 due to the krona depreciation and so will ours. It is ironic that our exports are not at least equal to these of Iceland (as a percent of GDP). And more ironic is the fact that some people do not see the huge export potential of Greece. So we have to invest in the quality of our tourism and shipping industries and let the depreciation take care of the price competitiveness.

    2) The fact that Greece has to change its entire monetary system definitely adds complexities, all of which are manageable. The return to the drachma should be prepared well in advance, publicly informing citizens that their deposits are guaranteed, followed by a short bank holiday and the imposition of capital controls. The capital repatriation (reversing the outflows that took place because of the euro uncertainty) will help contain the dive of the parity along with the increasing demand for our products and services, courtesy of the improvement in competitiveness.

    3) The contagion effect will indeed be catastrophic for the rest of the Eurozone but I believe that caring for the other member nations is more than a luxury for a country with 22% unemployment, 54% youth unemployment, a vast output gap and suicide rates doubled since 2009. We will benefit immensely after regaining our monetary sovereignty and begin following expansionary fiscal and monetary policy. Argentina and Iceland set the example. Arguably, we can do even better.

  13. Dear Yani

    As it is my first comment, I would like to congratulate you for your very active role in the Eurozone crisis debate and particularly for “The Modest Proposal” and your consistent thesis with regards to the dysfunction of the European and global surplus recycling mechanism.

    My point is whether Paul Krugman has attempted to ideologically play with the minds of the “misanthropic” in order to strike the financial discipline structure. If we accept that the “stupidity” of the rescue-slave packages does not just reflect the incompetency of the EU leaders, but it is more an authority game of the established financial discipline structure, then it might be prudent to claim to our beloved EU partners that Greece is not overly dependent on them. On the contrary, what’s more important is that the Eurozone will not survive from a Greek exit.

    There is little doubt that Greece would most likely face these specific serious consequences that you have mentioned but this is something that we might not need to highlight at this critical moment. Besides, the EU leaders have repeatedly stated that the Eurozone will survive a Greek exit with almost insignificant cost; and even if this contention is inaccurate, I assume that it is responsible for the fact that a third of the Greek electorate did favour the coalition that supported the rescue-slave packages.

    I find it hard to believe that one third of the Greek electorate trusted these particular Greek politicians to essentially renegotiate the loan agreements; rather a significant part felt intimidated due to this cunning authority game, especially when a large part of the public lacks sophistication regarding political economy and economic history. Therefore, my impression is that in order to spark a change in the rules within the Eurozone towards an effective surplus recycling mechanism, we have to be more confident about ourselves, spread this confidence to the rest – and possibly defy some future dangers so as to balance this authority game.

    I recognise that in order to have leverage during negotiations, the EU leaders must have the impression that we can do otherwise. But to follow the current flow is to become slaves and be deprived of our identity. Therefore, if we recognise and show to Europeans that the majority of them (if not all of them) has more to lose from a Eurozone break-up than we have to lose from a possible exit (since they threat us that violating the austerity pact means an exit from the Eurozone, thereby employing this authority game), then we might obtain more leverage and take on our side more people from more European countries. This development might coerce Berlin towards the reform of the Eurozone.

    All the best

    • “the Eurozone will not survive from a Greek exit.”
      That’s delusion on a grand scale, the tail believing it can wag the dog. But, hey, let’s simply try that. My bet is on the Eurozone profiting from the exit. Greece has only contributed negative headlines, for way too long. Once it’s out, the other struggling countries will enjoy a much better environment, I’m certain.

    • @ Gray

      Here is another one that thinks we asked for the money.
      Seriously now ,when will you stop believing the propaganda?

      Your money does not go to us for growth.
      You do not help us for growth.
      The money go to your own banksters and your government “helps us” make sure of that.
      We are a laundering operation.
      What is it to like?

      If the help was real we would have thanked you all the way to the next century.
      We do not wish anything bad to the Germans either. On the contrary. And i also have personal reasons to say that.

      Just see the truth and do not accuse arbitrarily.
      Noone is avoiding responsibilities.
      The Greek government made mistakes and now certain people ,with the excuse of helping us the people ,make things worst.

      You lived this in Germany with America and you didn’t like it. Should we?

  14. Germans talk about planning ahead for a GrExit and ringfencing. They claim euro will survive. But what if the GrExit is a success for Greece?
    What about the 500bn stocked away in safe heavens by Greeks as the Germans say ?
    After exiting the euro my guess is those idle savings will return to acquire greek assets (and they will be welcomed too, besides the immoral and selfish position of their owners). Wouldn’t these be enough of a stimulus for the Greek economy? Also what do you think Chinas position would be towards Greece, in case of a GrExit, especially with a leftist government in power ?
    I think Krugman is making our case here because one thing they fear more than a GrExit is a successful GrExit.
    It would be an immense blow towards the EU, effectively signalling “get out now” to the rest of austerity stricken countries.

    • You are absolutely correct. Guess why you do not hear anything about iceland in the mainstream media!

    • “But what if the GrExit is a success for Greece?” Good for them! Hey, Germans don’t wish the Greeks badly. If an Euro exit jumpstarts their economy, we would be happy for them. We really would like to see them accepting responsibility for their own problems, without them constantly asking (or rather, demanding) us for more money. You don’t like our medicine? No problem, invent your own one! Just don’t expect us to pay for that. We’re at the point were we would rather cut our losses instead of being asked to throw more Euros into a bottomless pit. You want money? Print your own one! Period.

  15. BTW, Demetri and other passionate Greeks here in this blog.

    I am not sure if you know who Nikos Lygeros is, but he appears to be the smartest Greek alive today with a registered IQ of 189. Einstein’s was below his, in the high 170’s I think (just to give you a reference point).

    So, here is what the smartest Greek has to say about our present condition (don’t expect him to care too much about elections) and please focus on the overall theme and his big picture:

    http://www.lygeros.org/articles?n=9373&l=gr

    My point is: why do I have to listen to Krugman and Weisbrot when I have a much smarter guy than both of these fellows to listen to?

    • Yes i watch him.
      I also liked watching “Casus belli” and Demetra Aleksaki.

      And i couldn’t agree more.
      All parties are mentioning EEZ anyway.

      Can you know who’s the liar?

    • … Nikos Lygeros … appears to be the smartest Greek alive today with a registered IQ of 189.

      Wow … you don’t say? Apollo be praised, just how many Greeks do you know?

      Einstein’s was below his, in the high 170′s I think (just to give you a reference point).

      The chess Grandmaster Bobby Fischer is alleged to have had an IQ of 187. Outside the world of chess, the guy was a total whackjob (just to give you ANOTHER reference point).

      My point is: why do I have to listen to Krugman and Weisbrot when I have a much smarter guy than both of these fellows to listen to?

      My point is … anyone who tries to sum up a human being’s intelligence (and capabilities) with a single number — well, let’s just say he/she isn’t very intelligent.

    • @ lastgreek

      Agreed.
      Many types of intelligence ,many processes.
      Being smart is the whole character and always walking ,trying to become better.

      First the heart ,then the rest.

  16. @ Yanis

    I think you should allow for a theme based chatroom application on your site.
    What say you?

  17. From a long time American reader but not commentor,
    Thank you Yanis, you gave me what I have really been needing, namely armor, to argue with people why leaving the Euro would be a disaster for Greece and why the austerity plans have to be torn up. That they are-not in conflict, that is a lie spread by the fools in Berlin. But I think you know what the problem is Yanis. People want a reason why things are so bad now and are terrified by the truth, so they cling to “greeks lazy spendthrifts german hardworking frugal” reason. Or it was just greed that caused the crash of 2008!
    This is a European problem and needs a European solution, but in the end the world needs to get together on this. Saying all that, sometimes in history the “weakest” link plays a role bigger than itself. Greece during the war did give hope to the whole world. Those Nazi divisions at the gates of Moscow in those early December days could have used those 6 weeks.
    Keep up the good work and do not run for office!
    PS.
    A roadmap for outreach to German people about this crisis.

  18. Yanis,

    From a stance of profound ignorance, I don’t see your argument as clashing frontally with Krugman’s (I don’t know about Weisbrot’s). I read Krugman’s blog entries as saying, What if Greece winds up leaving the euro? Will Greece vanish as a viable society? No, it won’t. And the case of Argentina offers a certain analog to think about Greece’s certainly unique and historically-specific case. Analogies are always relative. So, Krugman’s premise is precisely what you’re trying to preempt with your argument. One can question Krugman’s judgment for rushing to assume as given an event that should be forestall, rather than encouraged. And that is the real difference.

    Your argument, as I understand it, is that Greece should not leave the euro, because dealing with the consequences would be a very uphill and unnecessary battle for the working people of Greece, who (despite what the mythology fostered by German banks) did not have much of a break even during the boom. You are stressing the avoidable difficulties Greece would face in such scenario. But, again, Krugman is entertaining the case in which an argument like yours fails to inform a drastic change of direction in the political process. In such an eventuality, he admits that Greece would face dire consequences, but that there would also be opportunities to rebuild and reorient the economy.

    The substantive difference stems from the different situations or roles that you and Krugman are playing. Krugman is speaking as a liberal academic and concerned citizen. You are directly engaged in situ in the political struggle, trying to shape things up, and you have a personal history of commitment with the struggles of working people. You think like a fighting agent, not like a more detached (even if sympathetic) commenter looking at things from a more detached perspective. My 2 cents.

    • You may be right about Krugman. But Weisbrot is adamant that Greece should bail out forthwith. And Krugman has lent his support…

    • There is absolutely no benefit for Greece to leave the eurozone now. Two years ago(when the crisis started), maybe . But certainly not now.

      From any aspect you look at it, for Greece to voluntarily(or not for this matter) leave the euro is the dumbest thing ever.

      Conversely, staying in the euro does not mean that Greece has to abide by Merkel’s arbitrary conditions. It simply means that Greece stays put and Merkel begins her remarkable transformation from an ugly caterpillar to an average looking butterfly.

  19. Dear Baumann,it was not a reply to your comment, i made a mistake.
    @No EU dictatorship?
    Το ότι το σχόλιο μου γράφτηκε στα Ελληνικά απαντά στο ερώτημα σου.Παρεμπιπτόντως το
    nickname σου πάει.

  20. Dear Baumann, it was not a reply to your comment.I made a mistake…
    @ No EU dictatorship
    Το ότι έγραψα στα Ελληνικά απαντά στο σχόλιο σου.ΤΕΛΟΣ.

  21. Yani,

    Even though I am a big fan of yours I disagree with your latest post!

    I only agree on your diffence number 3 which is correct but in regards to difference number one Weisbrot and Krugman prove that you are wrong and that the main reason Argentina recovered was not its Export sector but the opposite effect namely the price increase of the imports and subsequent internal production and substitution of formerly imprted goods!

    On the difference number 2 I agree with the statement of Bill:

    “There’s another intermediate solution for Greece without leaving the EU: create a new currency PARALLEL to the euro, that would be used to partially pay public staff and pensioners and can only be used inside Greece. With the same value as the euro, but not convertible. If you don’t have time to put notes and coins in circulation, make it an electronic-only currency, which brings additional benefits. ”

    So net, net, if we Greece is forced to leave the Euro it will be mostl likely the end of the Euro and the EU altogether but not the end of Greece!

    • The problem with a parallel currency is that it would be utterly worthless. The Bank of Greece would not be able to maintain its value – even if it were not convertible. No one would want to hold it and its value would fall precipitously.

    • I don’t get it, Yanis. I’m not an economist, but no one would want to hold the new currency, UNLESS the government request taxes to be partially paid in new euro-drachmas, with the same value as euro.
      That’s the idea: pay public staff and pensioners, in part, with new euro-drachmas. As long as taxpayers have to partially pay taxes with euro-drachmas, people will want the new currency.

      Government could even buy toxic assets in the banks with newly created euro-drachmas, which would be then used by banks to partially pay expenditures like salaries (mostly spent in national consumption), while reserving the precious euros to repay their debts.

    • I wish to join Bill in his arguments. Furthermore, I think that the overall objective of running a silmutaneous currency for interim use is to avoid destructive hyperinflation within Greece. So the real problem is with vital imports (e.g. oil) which we will not be able to pay with our new interim currency. As Yani has pointed out it is ridiculous to suggest that importers will have a problem supplying Greek domestic market with much needed commodities. But it will be highly costly since noone will want to hold it as Yani says. This is why (in the short-term) a peg with the dollar could help. It was done after WWII anyway so why not again? Euro is stronger (and will be after FED’s recent policies) than dollar. So instead of shock and awe we go from Euro to Dollarised currency and as soon as productivity gets restored we can then issue our New Drachma. This will buy time and limit any possibilities of hyperinflation recking havoc in our society. The ultimate goal is to restore productivity in our economy bringing back investor and consumer confidence.

    • “This is why (in the short-term) a peg with the dollar could help. It was done after WWII anyway so why not again? Euro is stronger (and will be after FED’s recent policies) than dollar. So instead of shock and awe we go from Euro to Dollarised currency and as soon as productivity gets restored we can then issue our New Drachma. This will buy time and limit any possibilities of hyperinflation recking havoc in our society. The ultimate goal is to restore productivity in our economy bringing back investor and consumer confidence.”

      I fully agree with Chris! This has a multiple benefits for Greece:

      A. There is a planned devaluation of the order of about 30 percent which helps to increase domestic productivity
      B. It is an internationaly accepted tender and gives us economic access to the Dollar block
      C. Greece could do Dollar liquidity swaps with the US FED and get paper bills into circulation and have enough USD for import of goods
      D. The devaluation will close the two lethal deficits at the same time namely the current account deficit and the budget deficit!!!

      BTW. Here is a very nice study of the Greek economy in the 90’s by Prof. Pelagides and he rightly points to the negative effects of the ERM mechanism on the Greek economy and the two deficits:

      http://www.ces.fas.harvard.edu/publications/docs/pdfs/CES_WP46.pdf

      Besides, high interest rates are not only kept artificially high in order to
      attract capital and compensate for low state revenues, but also because of the need to prepare the national currency to formally enter the European Exchange Rate Mechanism (ERM) and keep up with Maastricht obligations regarding the creation of a common European currency (ECU) and so, as is believed, fight inflation. First of all, a high degree of exchange rate fixity requires correspondingly high levels of real interest rates, which further speeds-up the debt accumulation process both directly by increasing the interest payments on debt, and indirectly by reducing the demand for high-powered money and the growth rate of output (Papademos 1993: 153-154). Thus, this policy keeps the deficit at high levels and balloons debt, while at the same time, high interest rates hit the real economy and bring on economic ine11ia as the increase of GDP can not counterbalance high interest rate payments. Moreover, this has the result of an increase in the average rate of state services in order to cover the deficit. and it leads to an increase in prices and inflation. Inflation today remains around 15% and a recent tendency to fall by 2-3 points rapidly overturned by a need to increase taxes (from 22.3% of GDP in 1989 went to 27.2% in 1992) in order to cover an unexpected high deficit in the end of 1992. The fight against inflation does not take place neither by keeping the drachma parity high because a “hard currency” policy weakens trade balance. From -1l.9 as % of GDP deficit in 1988. trade balance grew at 15.8 % in 1992 (OECD 1993a: 71) and thus. deterioration continues. \Vhile the trade deficit is growing. the artificial nominal drachma parity is seriously undermined, while sentiment about the drachma is dominated by the performance and prospects of the current account. Then. real parity falls off due to growing trade deficits, reinforcing market speculation over the national currency and keeping inflation at high levels. despite the fact that economy is in an unprecedented deep recession.

      !!! This policy, combined with excess disabsorption by highly restricting domestic demand, had as an outcome even more catastrophic results on the real/industrial economy. The fall off in domestic demand reduced the size of the domestic market and diminished economies of scale for enterprises, increasi ng the per unit cost -and fUlthermore boosting inflation once more. Enterprises, even those with much potential, find it always more difficult to compete in the international market arena when imports are su bsidized \’ ia the undervaluation of the f?reign currency while, at the same time, expolts are taxed by an “expensive drachma”. As a result, they find only one way to restore competitiveness through the BlustonianHarrisian (1988, 1990) “low road restoration of profits” which is based on low ,,,,age labour force, and restores competitiveness in the short-term, but definitely undermines it in the long-term by lowering investments and preventing technological change (Cohen and Zysman 1987, Pelagidis 1989. 1993). It is estimated that only as a result of further wage cuts alone, there has taken place a sharp increase in Greek profitability of up to some 80% since 1990 (Barkleys 1993: 3), without actually increasing…….

      and this as well:

      Authors who support “hard currency” policy believe that in any other case inflation will boost again, especially the “imported onc’! and then it would not be possible to bring down interest rates. We must mention at this point that:
      a) it is very possible that in the case that we let the currency slide accordi ng to market signals. foreign competitors will keep prices down so as not to lose their domestic market share and. b) by letting the currency find its true equivalence, we make exports more competitive and so increase production. thus compensating for the undervaluation and counterbalancing inflation expectations coming from
      it by enforcing production and improving trade balance.

      !!!!! Moreover. exchange rate parity should follov more closely the currency fluctuations of those countries which especially produce goods competitive to Greece, like Spain, Portugal and Ireland so we can efficiently support national competitiveness. Therefore, although exchange rate policy is a vcry delicate matter and a very sensitive one and thus careful movements need to be made. a selective, differentiated and gradual sliding of the national currency is what this paper proposes for the time being!!!!!!!!!

  22. I see there are many here (including me) that seem to be unconvinced by Yanni’s arguments (although, speaking for myself, not by his conclusion). Thus, I take the liberty of posting a second reply.

    The very real issue, raised by Yanni in point #3, (although the title of point #2 would be more appropriate :-) ) of a “greek exit” is in that there is no legal, reasonable or stable definition of “greek”, i.e., which part of transactions and financial assets (including money) is “greek”. I don’t know what Frankfurt’s bankers had in mind when they spoke of
    “cauterize and print” (see http://yanisvaroufakis.eu/2012/02/14/cauterise-and-print-germanys-newest-plan-a-cauterise-and-print-germanys-newest-plan-a/) but I would like those who know more than me to publicly propose possible “scalpel tracks”.

    But, moving this issue further, suppose that the Modest Proposal is fully and truly implemented and works as advertised (in terms of growth). How will that address the problem of existing _private_ debt, which is far out of equilibrium compared the price of other assets and labor in some of the PIIGS?

    I heard Yanni state (I forget where and when) that this is a “second order problem”. Is it really? In other words, even if the EZ can be saved technically, via a MP-style change, should it be saved? Or is the MP just a first step that will **soon** be inadequate without further measures, and what will these measures be?

  23. Hmmm … Did the Germans just blink?

    From the New York Times, first paragraph:

    Softening, Merkel Says She Is Open to Stimulus for Greece By NICHOLAS KULISH and MELISSA EDDY May 16, 2012

    BERLIN — Chancellor Angela Merkel of Germany said Wednesday that she was ready to discuss stimulus programs to get the Greek economy growing again and that she was committed to keeping Greece in the euro zone, signaling a softer approach toward the struggling country.

    Then again, we just had the credit rating agency Fitch, a hired gun, downgrade Greece again. Is this supposed to be a warning to the Greeks lest they are thinking of voting for the anti-bailout parties in the next election?

    • Oh yes!!!

      She said that austerity and growth are compatible!!!
      I guess she is not so sure about their being safe of a Greek exit then.

      Now apologise to the Greeks and the rest of the world for the negative propaganda against a whole nation.

    • Sorry to disappoint you: Merkel´s and my understanding for growth is liberalize the labor market.

      The easier you can fire someone the more likely you are to hire someone.

    • @ No EU dictatorship

      Who said i don’t agree or disagree with that specific notion?

      If you have read my position on how a system should function ,you would know that “zooming in” the most usual and everyday activities of people i want the more flexibility possible.

      Now someone might say ,”how the rights of people will be protected?
      And you say you care?” Bla bla.

      Easy.

      By having more absolute rules ,proven to be absolute by nature herself ,whether we like or not ,at the broader frames of society.
      More controlled markets ,so a business won’t have to play games with the rights of people and labour workers won’t have to play games with the rights of businesses.

      In other words i redefine the way we categorize the usual ideologies that enslave minds , because important principles of different levels and intensity of influence do not get the proper attention.

      So i can not really say that i am a lefty or a righty or whatever.
      My grid is entirely different. More natural.

      We were made to base our life on earth and advance from her primarily ,gain knowledge and have an open system of mental transactions for everything (technology etc.) ,without losing our touch with nature. Any system should be created based on the above.

      Then again ,political reality is different.

      What i know is that if people decide to become more autonomous by themselves ,redefining will occur anyway and not only the powers will lose their power naturally ,they will also not be able to do anything about it.

      As Ghandi says ,we should have a “peaceful revolution”. And a peaceful revolution we can have if people (all people of the world) do not give in to fear and change their habits (all people ,not the so called “lazy Greeks”) for their own sake, without interfering destructively to anyone.

  24. It doesn’t happen often, but sometimes God (if you indeed happen to believe in one) smiles on us

    Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.

    The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.

    Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.

    [...] The lawsuit between Overstock and the banks concerned a phenomenon called naked short-selling, a kind of high-finance counterfeiting that, especially prior to the introduction of new regulations in 2008, short-sellers could use to artificially depress the value of the stocks they’ve bet against. The subject of naked short-selling is:

    a) highly technical and

    b) very controversial on Wall Street, with many pundits in the financial press for years treating the phenomenon as the stuff of myths and conspiracy theories.

    Now, however, through the magic of this unredacted document, the public will be able to see for itself what the banks’ attitudes are not just toward the “mythical” practice of naked short selling (hint: they volubly confess to the activity, in writing), but toward regulations and laws in general.

    “Fuck the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.

    We also find out here how Wall Street professionals manipulated public opinion by buying off and/or intimidating experts in their respective fields. In one email made public in this document, a lobbyist for SIFMA, the Securities Industry and Financial Markets Association, tells a Goldman executive how to engage an expert who otherwise would go work for “our more powerful enemies,” i.e. would work with Overstock on the company’s lawsuit.

    “He should be someone we can work with, especially if he sees that cooperation results in resources, both data and funding,” the lobbyist writes, “while resistance results in isolation.”

    There are even more troubling passages, some of which should raise a few eyebrows, in light of former Goldman executive Greg Smith’s recent public resignation, in which he complained that the firm routinely screwed its own clients and denigrated them (by calling them “Muppets,” among other things).

    Here, the plaintiff’s motion refers to an “exhibit 96,” which refers to “an email from [Goldman executive] John Masterson that sends nonpublic data concerning customer short positions in Overstock and four other hard-to-borrow stocks to Maverick Capital, a large hedge fund that sells stocks short.”

    Was Goldman really disclosing “nonpublic data concerning customer short positions” to its big hedge fund clients? That would be something its smaller, “Muppet” customers would probably want to hear about.

    When I contacted Goldman and asked if it was true that Masterson had shared nonpublic customer information with a big hedge fund client, their spokesperson Michael Duvally offered this explanation:

    Among other services it provides, Securities Lending at Goldman provides market color information to clients regarding various activity in the securities lending marketplace on a security specific or sector specific basis. In accordance with the group’s guidelines concerning the provision of market color, Mr. Masterson provided a client with certain aggregate information regarding short balances in certain securities. The information did not contain reference to any particular clients’ short positions.

    You can draw your own conclusions from that answer, but it’s safe to say we’d like to hear more about these practices.

    follow matt on rollingstone.com

    http://www.rollingstone.com/politics/blogs/taibblog/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-2012051

    • “He should be someone we can work with, especially if he sees that cooperation results in resources, both data and funding,” the lobbyist writes, “while resistance results in isolation.”

      Exactly what the band “Germany and the brusselians” tries to do to Greece.
      Hey ,there are still people that believe the story of the American government for the battle against terrorism.
      What can you say?

  25. There’s another intermediate solution for Greece without leaving the EU: create a new currency PARALLEL to the euro, that would be used to partially pay public staff and pensioners and can only be used inside Greece. With the same value as the euro, but not convertible. If you don’t have time to put notes and coins in circulation, make it an electronic-only currency, which brings additional benefits.

    See Steve Keen at 5:35:

    Randall Wray gives a hint of the same idea applied to a Job Guarantee scheme for Ireland in the penultimate page of this paper: http://www.levyinstitute.org/pubs/wp_707.pdf

    “The first would be to develop a new currency—let’s call it the punt—to be used for government payments of wages in the JG. All levels of government would agree to accept the punt in payment of taxes, fees, and fines. Assume that at government pay offices the punt is accepted at par for euro tax debts. Let us further presume that punts would be supplied only through government payment of wages to JG workers. Since JG workers as well as anyone with a tax due could use the punts to pay taxes, they would soon circulate widely. The government would not make the punt convertible to euros—it would not supply euros when punts are presented—but in private transactions they would trade at close to par because in payment of taxes they are equivalent.”

  26. And here something for the all-important English speaking audience(where would we be if we couldn’t understand each other)

    http://www.guardian.co.uk/world/2012/may/17/greece-euro-something-give

    Key excerpts:

    ….EU leaders also mean it when they say they’d prefer to keep Greece in the euro. To that end, they are now effectively telling the Greeks how to vote on 17 June – for the two big discredited parties, New Democracy and the socialist Pasok, whose combined vote collapsed from 79% to 32% 12 days ago.

    These may be extraordinary times. But it would be more than extraordinary to see such an electoral shift within six weeks. All the signs so far are that the young firebrand bailout rejectionist, Alexis Tsipras, – the main beneficiary of the stalemate in Athens – is likely to improve his performance in the election rerun. He is said to be heading to Berlin and Paris next week for talks on the next moves……

    …..The rightwing Spanish government sounds committed to slashing spending, tearing up Spain’s social contract and making the structural changes it needs to meet the eurozone budget deficit targets.

    But it can’t do anything about Greece. It fears being next in line of fire for the financial markets. It is angry that Berlin and Paris are failing to fix the euro, leaving Madrid highly vulnerable to events outside its immediate control.
    ….

    ….Greater flexibility and longer timelines for debt reduction would allow the new star of Greek politics to argue that he won his “renegotiation” of the terms of Greece’s rescue. The Germans would still stress that austerity remains sacrosanct. The new French regime would declare that it is already making a difference, that its emphasis on growth strategies is already paying dividends.

    The time and the place to agree this is next Wednesday at a special EU summit in Brussels….

    Dean’s note: Just another minimal & incremental kicking the can down the road move by Germany next Wednesday. Been there, done this. I think Angela is cute when she uses the same old tricks.

    • Better 1 trillion today then 2 trillion in 2 years :-). Bottomless pit…

    • This reminds me of the Spanish and the French people that were making fun of Greeks whom back then were only observing the situation ,while the Spanish started the movement of the “indignant”.

      Now they may give in to the blackmails fearing of pain ,thinking Greece as a bad example ,when the haircut and bail outs have nothing to do with Greece and are only a political game between the Merde (the thug formerly known as Merkozy) ,the Brusselians and the banksteroids.

      Who cares if people die?

  27. An American tax exile living in the Cayman Islands has emerged as a winner from the chaos engulfing Greece, even as the political and economic turmoil in the beleaguered nation deepened yesterday, with Athens putting a senior judge in charge of an emergency government to lead it to fresh elections.

    Kenneth Dart, the Michigan-born heir to a disposable cups fortune, was handed an estimated €400m (£320m) cheque from Greece this week, after successfully calling the country’s bluff and refusing to take part in the restructuring of government debt that saved Greece from default in the spring.

    After decamping from the US on his 220ft yacht, he settled in the Cayman Islands, where he is a powerful real estate developer. Dart Management, along with another vulture fund Elliott Associates, is likely to have picked up Greek debt at a fraction of its value in the hope of being able to force the country into paying some or all of what it owes. The two firms are still suing Argentina in the US courts to demand full payment of bonds on which that government defaulted in 2002. Mr Dart first came to international attention in this sphere by pocketing an estimated $600m from putting pressure on the Brazilian government after its default in 1993.
    It’s time to stop these off-shore fiscal parasites, such as the Cayman Islands, from running parallel economies, which solely exist to ponce off the backs of the rest of the global economy while offering nothing in return.

    “By all means let idle rich sods like Kenneth Dart take their dads’ fortunes – which they themselves did nothing to earn – to tax havens. But then let them keep and spend them there. They’ll soon see how far daddy’s cash will get them when they stand no chance of spending it anywhere else, or bringing it back, without paying huge amounts of tax as well as stinging transfer charges.

    They just siphon off cash from where it is desperately needed for it to lie idle most of the time in bank accounts in various currencies in countries whose actual currency isn’t really worth the paper it’s written on. Then they wait they see which struggling victim they can pounce on next.

    Too many people on these sites blame all of the Greek people, or display complete indifference to the plight of babies, the infirm, widows, school children, nurses and all the others, who are suffering because of bankers greed. I suppose they deserve it for being Greek, eh? And the vile and voracious Kenneth Dart deserves to pick their bones? Makes you proud to be part of the human race.

    With their huge reserves losked out of the world economy it will be possible to print more money to make up for the shortfall.”

    commentary on today’s independent (uk)

    • “Makes you proud to be part of the human race.”

      Well i am sure proud to be Greek ,because History proves that we may be anarchs in our own country ,but our own problems in no way do they cause such trouble in others.

      Even when we were expanding to other places ,the good and the just outweighed the bad ,by far.

  28. Pingback: How bad would it be for Greece to leave the euro?|PolitifreakPolitifreak

  29. So Argentina was saved by the emrging economy of Brazil and Chinese demand for its products (roughly put). What made Argentinian products accessible and affordable to Brazilians and ESPECIALLY the Chinese? Could it be currency devaluation?
    Of course Greece’s trading partners are in recession (which driven by bank debt transfered to public debt co exists with higher than target inflation). Would cheap Greek products become attractive in such an economic environment? As for the emerging next door neighbour ….how about Turkey? Exiting the euro will be a painfull solution no doubt. What I have not heard from Yani all this time is the fact that it cannot and will not happen overnight. Either both euro and drachma in circulation or using the US dollar as transitional monetary unit or any other feasible solution to secure a transition with the least pain possible (for our eurozone partners).

    • Conversion: 1,000,000 Drachmas = 1 Toner Cartridge to print more of it!

    • Yes ,we are to feel pain anyway ,so let us make this pain completely ours.
      Many solutions appear.

      People of Greeks when elections come again ,get out in the streets and dance. Especially in school yards. Show your “Greekness”.

      Θεέ’μ Ξαν Στείλων Το Παιδί’ς Ας Γουρταρέβ Τον Κόσμον!

      Let us upset those that are to be upset. :)

    • It was evident that ever since the debt crisis struck Greece, eurozone (Germany as paymasters) have decided to buy time not as Yanis points “to see what they will do with Greece and the euro” but to ringfence eurozone from a Greek collapse. So they have been preparing to cut us off from the start. And they still wish to do that (one look at the 2nd bail out is enough). Everybody is preparing for our exit besides us! That seems a bit wierd. Yes lets upgrade European policy, lets introduce eurobonds, lets adopt the Modest proposal and release the power of the European Investment Bank. But what if they still decide they would rather do all that without us lazy and profiligate Greeks? Or what if all those measures fail to materialise? What then? Fingers crossed and pray??? Take the Greek return to the drachma as a possibility (even a remote one) and suggest what can we do in the instance of such a (catastrophic) event. ANY FEASIBLE AND REALISTIC IDEAS TO WHEATHER THE STORM? This view that we simply are powerless before such a cataclysmic event of biblical proportions is pure BOLLOCKS!!! Pardon my English… What nonsense is this? Everybody else is thinking about it, they wish to go ahead and implement it and as for us…OH NO DON’T EVEN GO THERE!!! HAVE WE REALLY LOST OUR GRIP WITH REASON AND RATIONALE??? We are supposed to have invented those concepts in the first place (along with democracy, the olympic games and tzatziki). I don’t want to know who is right and wrong on the euro or the drachma. I want to know our options in any scenario coming to us. If you ask me the dilemma is just a diversion from what is really at stake. OUR ASSETS! NO ASSETS NO WEALTH PRODUCTION NO PAYING BACK DEBTES TO THE PEOPLE OF EUROPE.

    • You have to see the positive side on introducing the New Drachme (ND). Until Greece exits the Euro, noone will invest in Greece, because he is afraid that his assets get devalued when the ND is introduced.

      As soon as the ND is introduced money that was sittin on the sidelines will flow back into Greece. Even I would think about to buy up some hard assets on the checp side :-)

    • I see your point No EU Dictatorship. As long as we retain wealth producing assets in order to return back to a sustainable path then any investment is welcome. But a sell out (as is the 2nd baliout) will simply do irreversible damage. The first and most important asset is in danger already and this is our skilled labour force which is either idle or packing to escape the mess.

  30. Yanni,

    Another idea that was coined back in November I think, but not discussed a lot, was a “dollarification” of Greece.

    The idea was to convert everything (contracts, etc) to on an artificial 1:1 parity with the US Dollar.
    This will result in an immediate 30% devaluation that Greece needs. and we can use US dollar backnotes.
    This solve the availability of backnotes issue and the possibility of an out-of-control hyperinflation.

    Once the situation is stable, we may go back to euro, or issue or own drachmas and float the currency.

    This solves many of the above mentioned problems, but it creates more political ones. We know that the euro was more of a polical project rather than a financial one..
    Assume that the FED collaborates with this so does ECB.

  31. please excuse my ignorance i am an architect not economist. Why is there no mention of alliance or assistance with Russia in the context of Greece exiting. and with russia comes the brics i suspect. would you enlightened ones please comment in lay terms? thanks

    • My kind of irrationality :)

      How about posting some fast Irish dance? :)

  32. Mr Varoufakis,

    Comments like this: “Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina” could also be interpreted as “Greece cannot pull off anything”. You need to be careful with statements like that.

    I believe Greece eventually will be fine outside the Euro, although it will take a lot blood, toil, sweat and tears. Greece within the Euro is of course impossible. This has already been proved by the Greek people themselves.

    Greece’s problems will in the future, to a greater extent, be Greece’s problem rather that Europe’s problem. Therefore, your focus should be motivating the Greek people to do the right thing rather than blogging.

  33. Mr Varoufakis,

    Comments like this: “Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina” could also be interpreted as “Greece cannot pull off anything”. You need to be careful with statements like that.

    I believe Greece eventually will be fine outside the Euro, although it will take a lot blood, toil, sweat and tears. Greece within the Euro is of course impossible. This has already been proved by the Greek people themselves.

    Greece’s problems will in the future, to a greater extent, be Greece’s problem rather that Europe’s problem. Therefore, your focus should be motivating the Greek people to do the right thing rather than blogging.

  34. Pingback: L’uscita della Grecia dall’eurozona può distruggere l’Unione Europea? | Informare per Resistere

  35. Argentina had a current account deficit of 1 percent of GDP when they defaulted in 2001. Greece’s current account deficit is still above 10 percent of GDP. Doing such adjustment to the balance of payments overnight will likely end up in history books as an example of disastrous economic policy.

    Just look at the numbers from Bank of Greece

    http://www.bankofgreece.gr/BogDocumentEn/Basic_data_of_Balance_of_Payments-Monthly_data.xls

    The numbers show that funding from abroad is more important to the Greek economy than shipping and tourism combined. Hence, saying that Greece doesn’t need funding from EU/ECB/IMF is like saying that the Greek economy doesn’t need tourism and shipping.

    • Fuel excluded, Greece’s external trade is in balance.The whole current account deficit is patrly due to interest payments and partly due to fuel imports,and we cant really do anything about that…higher oil prices tend to increase the deficit,lower oil prices tend to reduce it.It would only make sense for Greece to get back to drachma if it was allowed to redenominate the debt in drachma.This would reduce the current account deficit by at least 4% of GDP (4% of GDP is currenty leaving the economy for debt servicing).
      If this happens,any current account deficit around 3-4% is sustainable with a reasonable nominal growth at 4-5%.After all a free floating drachma would not allow the current account deficit to grow back to its current amount (or the previous bigger amounts).

  36. Greece is not going to be kicked out of the EU, for a million reasons, historical and geo-political to name two.

    Historical: Greece is part of the European ‘story'; take away Greece from European history and you are losing a lot if not most of the positive legacies. What is left is world wars and imperialism. We know the European elite loves to be smug about their historical superiority and Greece is integral part of this.

    Geo-Political. If Greece falls out of the European orbit it will most likely find another benefactor, Russia or China for instance. Does Germany, as an exporter, really want to cement Chinese stranglehold over the Greece ports ? (yes, I know they manage Piraeus now)

    Supposedly inviolate laws become quite flexible when they come up against with political realities and pressures.

  37. Pingback: Yanis Varoufakis over het verschil tussen Griekenland & Argentinië | MRWONKISH.NL

  38. Draghi has taken a unilateral step to apply electoral pressure on the Greeks for upcoming election. From Eurointelligence blog:
    ECB pulls plug on Greek banks (or how to start a bank run)
    “The main story yesterday is that the ECB has temporarily pulled the plug on lending to some Greek banks to limit its own risk. The affected banks can no longer offer assets to the ECB as collateral for loans, and would have to seek costlier emergency financing from the Bank of Greece. It was not immediately clear which banks, or how many of them, were affected. Reuters quoted one person familiar with the matter said the capital of four Greek banks was so low they were operating with negative equity.
    Bloomberg quotes an ECB official saying that the ECB can only lend to sound banks and therefore won’t allow undercapitalized institutions to access its refinancing operations. “Pending the recapitalization of Greek banks that are severely undercapitalized as a result of the” debt restructuring, some “have been moved to Emergency Liquidity Assistance,” said ECB said. The so-called ELA is emergency support national central banks can provide to lenders with ECB approval.

    The move comes after Draghi acknowledged for the first time that Greece could leave the monetary union. While the ECB’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet,” Draghi said in a speech in Frankfurt yesterday.”

    Draghi’s playing hardball here – ‘if you threaten ECB by electing anti-memorandum govt in next election, we will crush you first’.

    • David:

      You are reading too much into it. Here is what is really going on.

      Almost a month or more ago, the ECB has forwarded to Greece 18 Bil. euros to recapitalize the banks, which were depleted by roughly a combined 85 Bil. euros(banks+pension funds) due to the PSI nonsense (Merkel’s idea).

      The funds were deposited to a state account but the departing FinMin Venizelos at the time wanted to attach political conditions to disbursing following the elections of May 6th. As a result the responsible Greek agency in charge of those funds started engaging in endless bureaucratic games invoking charter questions regarding its authority to disburse such funds.

      As Yanis has mentioned here many-a-times the recapitalization of the banks need not have political intermediaries. It should be undertaken directly by the ECB and the banks themselves – no politicians involved.

      As a result the ECB basically issued an ultimatum that unless such funds find quickly their way to the Greek bank patient(bleeding to death), then the ECB would temporarily suspend other support mechanisms until the Greek state does its part.

      Therefore what we have here is not any particular interference to influence the vote by the ECB. The vote influence is on the Greek political side which is using the bank recapitalization issue as a false platform to imply things outside the parties’ real influence or legal authority. The theater played with the banks is a tragecomedy all for domestic consumption purposes and for vote gathering on false grounds.

  39. Pingback: L’uscita della Grecia dall’eurozona può distruggere l’Unione Europea? « Verso un Mondo Nuovo

  40. the new currency will be debased ever so quickly due to this bifurcation, leading to hyperinflation and the loss of most of the competitive gains we might have hoped for from the devaluation.

    Perhaps the new currency will be somewhat debased for a time, but if so many people have Euros stuffed away in the freezer, they will be able to purchase goods in Euro for a long time to come, either on the black market, or imported from abroad via the internet (or shopping trips in Instanbul perhaps?).

    It is perhaps interesting to compare the Weimar hyperinflation: those who had access to foreign currency did well, it was just that so few had access to foreign currency. Your premise is that nearly everyone will have access to hard currency.

  41. Bank of Greece colleagues tell me that it will take months before ATMs are stocked with new drachmas once they get the go ahead to print them.

    I don’t understand why there can’t be an easy solution. For example, have a period of a few months where both Euro notes and drachma notes are in circulation, while the Euro is slowly taken out of circulation. Have a cutoff date after which euro currency can no longer be used for ordinary purchases. Since the Euro will be deemed more valuable, the drachmas earned by the populace will be spent first and the Euro currency saved and eventually spent abroad or put in bank accounts outside the country.

    Poland went through something similar when they introduced the new zloty notes and coins while the old zloty notes remained in circulation for a time. As I recall, it took about 6 weeks until the old notes became a rare sight.

    • There can not be an easy solution ,because the first directive is to save the banks ,their authoritative positions and the system as it continues to be an advantage for them ,not thinking that it reaches its end.
      They do not do the best thing for Greece and other countries ,they do the best thing for the grid ,their grid (greed).

      As Yanis wrote: “Staying in the EU will allow Greek citizens to take the Greek govt to the European Courts and win. This is why exiting one means exiting the other.”

      I only wish more people could see this and not just arbitrarily accuse.
      Corruption is everywhere. It is just that in Europe ,the truth appears first in Greece.

      I thank the problems in Greece ,because people wake up.
      We will not die for anyone of them so called “leaders” and their “Europe”.

      We are Europe.

    • I do not think Yani is very eager to get to know him even if he does….

    • He is older than i am!
      Not very eloquent. I hope he writes better in English.

      Anyway ,he should have made clear that no-more-austerity does not mean free meal and no reforms. Everybody thinks that because of the beautiful negative propaganda of the so called leaders and the willingness of their perfect people believing in it.

      It means ,reforms and growth.

  42. First, let me explain why I am back(in the blog). I said May 6th was the final day but I thought we would have a binding election. We didn’t. So, I hope some of you and Yanis can bear my comments until June 17th (assuming that’s the deciding election). If June 17th is not enough to make us part, then folks it’s fate. You better accept that we were meant for each other.

    Back to business. I heard that Tsipras spoke to Amanpour and want to hear the interview with anticipation.

    For those who think Tsipras is a Greek responsibility, he is not not. He is a 100% of Merkel making as follows:

    1. Tsipras did not sign the memoranda, Merkel did. Therefore, when almost 100% of Greeks are/became anti-memoranda (you have to be an idiot not to be) the platform for Tsipras rising is a 100% Merkel gift. So, my view on Tsipras is: Merkel made him, Merkel owns him now and she has to deal with him.

    2. When the guy (Tsipras) cleverly says that the memoranda are over/no longer valid (because people voted so) it’s not his idea either. Merkel again gave him the idea. When last week Brussels released only the debt rollover for existing loans, basically Merkel admitted that from this point on the existing Greek debt will be serviced by the EU (already EU has agreed on such). The fact that the money is sent to Greece to then pay the loans it’s meant to convey the image that actually Greece is paying the loans. But it’s a pure accounting trick. In essence, Europe ha already undertaken the servicing of the Greek debt which is as good as those debts be forgiven for the foreseeable future. So Tsipras is right again. The memoranda are no longer valid because even though the Europeans are unwilling to fund primary Greek deficits, nevetheless are fully willing to cover debt rollovers for the markets to be functioning. The difference between such loans not being officially forgiven vs continuing to be an ongoing a Greek obligation is basically negligible. Tsipras has accurately assessed such and called it to his credit.

    Again my view is that he is the only guy so far from the Greek political system that had the guts to do it and his instincts are so far perfect. I still maintain the view that he is not the right guy to govern Greece so I will not be voting for him. But as time passes the fact that Tsipras is a 100% creation of Merkel is inescapable. So, I would like to wish the chancellor good luck because I think it would be exceedingly difficult for her to get rid of him, because in order to do so Merkel would need to rid of herself first.

    • Interesting views Dean.May i ask what is your opinion about Samaras after seeing him all these days after the elections ?

    • Merkel will be out in 16 months, and is already weakened by voter sentiment. Obviously, your comment about some political trajectories as the knock-on effects of others is correct, but I do not understand even the concept of “responsibility” for Tsipras. Events are all interconnected, and it just does not make sense to allocate responsibility for reaction to those making the original action that stimulated it.

      I also fail to see your point about not supporting Tsipras, when not only is he the only one to maintain an honest position both before and after the election, but obviously has some good advisors around him formulating both political and economic strategy. All the rest — every single party, including the new ones — have discredited themselves one way or another, post-election. I have even spoken with lifelong ND supporters over the age of 90 who are effusing respect for Tsipras as a person and as a politician since the last election. This is a sea-change for Greek politics, if my small interview base could be extrapolated…

    • “For those who think Tsipras is a Greek responsibility, he is not not. He is a 100% of Merkel making as follows”

      What is it that makes some of you guys unable to understand that Greece and the Greeks themselves are 100% responsible for what they did and do? Not any other person, nation or force. The concept of one’s own responsibility is normally learned at around the age of 6-8 years. Not in Greece, it appears.

    • @ Dean

      First of all why should you leave at all ,even after the elections. Stay. We’ll drink virtual ouzo and eat virtual souvlaki.

      Now i want you to give me an analysis of why not Tsipras. And i do not mean the usual “He is an inexperienced kid”. He is. We know that. He knows that too. I hope.

      My opinion of maybe voting DL is because i thought about flexibility. Flexibility to better the deals made ,without causing trouble to the rest of the EU. Now if everybody (European leaders) continue to be absolute and hypocrites ,try to play the game “it is all Greece’s fault” till the end , use the legal loopholes to their liking since they have the power ,(quite reasonable for trolls) then situations change.

      We as Greeks ,must think how to create our own reality ,even if that means pain. So i might as well vote for Tsipras.

      Then again seeing the recent polls (Syriza 1st ,ND ,PASOK) ,i do not want a repetition of these days. So now it would be a good time for us to use the kind of thinking you used Dean when you were talking about ND. That is to vote for SYRIZA so it gets more power and form a government.

      On the other hand (that would be the third) ,we could still vote for other smaller left parties ,especially DL ,which we know can be flexible and form a government with Tsipras ,so as to take the place of one of the former major parties. But this time ,it would be a gamble.

      As i have said before ,i wanted want happened till now ,so as to force more data in the system ,see more actions and reactions and hopefully ,make the old monkey-do’s and the old structure evolve a bit.

      It so seems ,they are too old to evolve.
      I wanted to see all the smaller left parties form a coalition. It didn’t happen. It seems it will not happen ever.
      I’ll wait for till the last days to decide ,but till now ,SYRIZA gets the “thumbs up” attitude.

      Anyway ,we the citizens must wake up and force situations ,not do the usual ,that is to vote for a party and then wait for it to do all the right things.
      Because it won’t. It can’t. We ,from a distance ,see what they can’t see.
      Time to force for direct democracy. Or perconocracy.
      If not ,then who knows ,maybe they’ll get corrupted as well.

      I will not vote for a party to trust it. No ,i will vote for a party to hear us.

      @ Guest (xenos)
      Indeed

    • Let me try a combined answer for Crossover and Xenos.

      I think the plan now is to let Tsipras get elected first(June 17th), tried in government for a few months and then fail for obvious reasons (lack of experience, uncooperative Europe etc).

      Eventually I see Samaras at the helm as the only experienced party and let’s be honest – as one of the original anti-memorandum guys out there. The advantage Samaras has that no other party in Greece could demonstrate is that he comes from the same ideological camp as Merkel. So, he could do double the damage from “within”.

      Tsipras et al are easily dismissed at a European level as some “crazy leftists” ( a title perhaps not well deserved nevertheless quite potent). You see for the rest of the world, which sees Greece in a more dispassionate fashion, the label that has already stuck is that here we have a bunch of Greeks that they don’t want to take the medicine and of course are from the left. You know what I am saying; people will nod their heads and say “but of course, they are leftists what could you expect”? A leftist attack on the Merkel plan is the most predictable frontal attack in the battlefield , hence the most ineffective. Only a flank maneuver can deliver some real damage to Merkel and this could only come from within the same ideological camp as hers.

      My evidence for this comes from Merkel herself. Her dislike of Samaras is open and notorious and almost all Der Spiegel articles paint him as irresponsible and duplicitous (the highest compliment one can pay to Samaras, meaning that he is totally uncooperative with the Merkel camp).

      Merkel has made a humongous miscalculation about Greece. First she assumed that Greek politicians will be primarily responsible in selling her plan internally to Greece. Such has not happened of course, since the overwhelming majority of voters felt left out and not consulted in the matter. The results of the May 6th election prove such sentiment. Second, Merkel burned every Greek politician she ever came in contact with thus also burning her own bridges and ensuring complete failure in implementation.

      A primary tactic in politics is trying to ascribe your own shortcomings as if they were those of your enemy. So, when Merkel complains of the failure of the Greek elite, what she is basically complaining about is her own pronounced failure of turning such an elite into an instrument of implementation.

      Tsipras is riding high now and and is capitalizing on every single German failure so far. Even the smallest critique and/or threats from Berlin simply swells his ranks (an unbeatable proposition). So baring an accident or some exogenous event, Tsipras will be the first party and capture the coveted 50 seats in Parliament which is the controversial bonus of the party that comes in first.

      Such tactic suits the other Greek parties as well, because they think that Tsipras will surely implode once in government paving their return to power. There is of course the possibility that Tsipras comes first but still unable to form a government( a position that suits Tsipras best). Whether he is in government or a major broker to future Greek governments, the other parties from now on will have the excuse needed for the mess created by Merkel. They would correctly point out to Berlin that its refusal to offer initial reasonable terms has lead to a far more complicated situation absolving Athens from any conceivable adherence to what has been previously “agreed to”.

      Tsipras’ whole platform is not abolish the memoranda terms and the other parties can now point to Tsipras as the main obstacle of implementation. Tsipras is nothing more than a predictable response to the punitive aspects of the Merkel plan. Hence his rise is a direct result of the Merkel policies. So, he is now a Merkel problem; in fact a large enough problem to devour Merkel herself.

    • xenos,

      I also fail to see your point about not supporting Tsipras, when not only is he the only one to maintain an honest position both before and after the election …

      Exactly — Tsipras has consistently maintained that he refuses to surrender Greece over to the Troika. Moreover, Tsipras has proposed a default coordinated with the other debt-burdened countries of the Eurozone.

      … but obviously has some good advisors around him formulating both political and economic strategy.

      His call for the “termination of the military cooperation with Israel” might just be too much for the Zionists of Europe. In France, the powerful pro-Israel lobby supported/funded Hollande, Sarkozy; and Le Pen; they covered their bases, shall we say ;-)

      I have even spoken with lifelong ND supporters over the age of 90 who are effusing respect for Tsipras as a person and as a politician since the last election.

      Since the 1950’s, Greece has been controled by three political families. Through the cover of the two main political parties, ND and PASOK, these three families have looted Greece to the ground. The mere mention of ND or PASOK to a Greek should bring on an “effusion” ( ;) ) of disgust.

      This is a sea-change for Greek politics, if my small interview base could be extrapolated…

      It’s about damn #$*&^@ time! Let’s hope that Tsipras does not “evolve” from his honest positions a la Barack “Barry” Obama.

    • @ VSS

      You either do not have the inteligence to understand the games played or you are the one who doesn’t take the responsibilities of your government seriously.
      Maybe because you live all to well there and do not care who is behind the curtains and from whom she steals ,so that you can live better. Not because she cares about you ,but because the devil resides in your country and it is better to keep the citizens of that country happier.
      So ,you think ,”it just can’t be our governments fault” ,when others are in trouble.

      Production in many countries was destroyed so that you can now say ,”oh it is the German efficiency the reason we export so much”.

      Wake up.

      This is a full scale economic hit and the elite is gaining its legitimacy ,by convincing you that it is not their fault and it is not the system’s fault ,using negative propaganda against a whole nation and using the weaknesses of human nature ,knowing that people will be glad to accuse others without searching more ,as long as their own people are better off.

      The problems of Greece were not enough to cause an EU crisis.
      Ofcourse after two years of getting loans we didn’t need ,the so called “bail out” ,now we have more problems.

      I thank the problems ,because people in Greece woke up and saw what system they were feeding. Reform we need anyway.
      BUT SO DO YOU. Corruption is everywhere. And our corruption is not powerful enough to cause problems.

      Now it is your turn.
      And i say that because everybody is feeding the exact same system.
      The difference is ,your government ,(as the main servants of the banksters) ,manipulates the flow of desicions and capital ,while our government is one slave.

      The government of Greece takes on loans from you secretly and not otherwise accepted by the Greek people ,so that more imports can be made and then interest can be paid to the creditors from whom the products we bought. Good deal for you ,eh?

      IT IS A PONZI SCHEME AND IT IS COMING TO EACH END.

      History will once more reveal the truth and it will not be to your liking.
      You will not change history.
      This nation never dies.

    • @ VSS

      The only country in Europe that made the most and the worst corrupted deals in Greece is Germany.

      All the truely importamt problems in Greece are the exact problems everybody has and doesn’t even know it.

      We voted for the wrong people ,you do exactly the same thing.
      People do not have the knowledge needed ,knowledge that unfortunately appears only when problems arise.
      The difference is ,you live better.

      We tried to find alternatives to live when you didn’t because of better organisation. Now ,the elite is using the bad truth of the Greeks ,to hide their own bad truth. And the only reason for that is because you gained power at some point in history and the advantage ,while we always had internal manipulation.

      Where do you want me to start from?
      Economy: Loans we gave and never got back.
      Archeology: Thousands of artifacts and hundreds of statues stolen from Germany and others. Especially Germany.
      History manipulation: Germany ,Turkey ,FYROM ,cultural attacks
      CIA operations: Burying researches for natural resources ,cultural attacks

      and many more.

      Now go piss off.
      You act like little babies.
      Boohoo ,it is all the Greeks fault.

    • @ VSS

      The system is FUBAR and the elite is still asking the people to BOHICA.

      Everybody in History had problems ,everybody.
      It so happened that the “bad guys” (modern elite of all countries) prevailed this time.

      The time is coming when everybody will have to push the reset button and either start the whole same damn system from the beginning ,with all the known problems that it causes ,or take the opportunity and use a better one.

      And then History will reveal the truth again. For everybody. As always.

      WAKE UP.

      Oh ,and another thing. I didn’t mean to say FYROM but Skopje.

    • @ Dean

      Oh ,you are good. You are very good!

      Regarding the 50 seat bonus.
      The law states that the first party must have at least 20% votes ,to get the bonus. Ok with that.
      There is something else i am not quite sure about.

      The SYRIZA party is a coalition of smaller parties and some say it doesn’t qualify for the bonus anyway. This is something Tsipras supposedly wants to change after the elections.
      Any thoughts?

      Also there is constitutionalist talk (oh man ,even they do not know whats happening with them and the law) ,that when second elections ,no bonus is given anyway.

      And that we may have third elections after that because of the lack of…. “chairs”.

      WHAT THE HELL????

      This would only prove that everybody (elite) is doing the job done. Kick the can down the road and sell Greece.

      The Greek system is perfectly build to allow for decision manipulation.

      Anyway as for Tsipras ,there is the scenario that he will form a coalition with any party in the second elections ,with him as PM.
      Because of the situations ,whatever happens in the elections ,his party gets established and gains the chance to show what it can do.

      After that ,you gave a pretty cute analysis Dean.

      Over to you.

    • Irene – Thanks for the kind words, Everything from Thessaloniki is cool. It’s my city of birth.

      Dimitri – see the combined reply to Grossover/Xenos.

      Very Serious Sam – The only thing Greeks are guilty of is lending themselves to experimentation by Merkel. Everything after that is 100% Merkel and only Merkel. I would guesstimate the damages to Greece due to German malpractice at roughly 1 Trillion euros. Once you pay up then you are free to frame your own reality.

    • @ Dean

      Sallonica is your city of birth? Cool.
      How do you vote there?
      You get a bougatsa of ballots? :)HAHA:)

      (Joking benevolently ofcourse ,couldn’t help it)

    • Demetri:

      Of course I am cute! :-) What did you expect?

      Seriously now. Remember what I said when I supported Samaras. That I was not supporting him per se for any particular liking of him, rather because he had the only chance to form an independent government (all of this prior to the vote).

      Since my position is not person specific, sure you can replace Samaras with Tsipras if Tsipras can go all the way and form an independent government.

      So, that was my first criterion. Give you vote to the person/party that has the highest chance of forming an independent government.

      My second criterion, was the irritability factor. In other words, Tsipras should irritate Merkel quite a bit to fit the bill. He irritates her alright but no as much as Samaras coming from the same ideological camp as her.

      But o.k. I am game. Let ‘s say Tsipras gets in first and irritates Merkel enough; technically you can have my vote.

      But here is the thing. I consider a coalition government the worst possible outcome for the country. Only a single-party government will do.

      Therefore, if by us voting for Tsipras we don’t give him enough votes to form an independent government whereas if we had given the same vote to Samaras we might have achieved a strong independent government, then this causes a serious pause.

      This is indeed our prisoner’s dilemma for these new Greek elections of June 17th. We could vote for our sentimental/ideological favorite, however if such denies the chance to our strongest prospect in forming an independent government THEN we are all worse off.

      This is serious game theory my friend. Why don’t you ask a theorist to answer this question for you. I hear Yanis has a specialty in Game Theory.

    • @ Dean

      You are game? Does that mean that when your season comes i must hunt you down? How is a Dean cooked?

      Seriously ,again we have to take into account the sentiment of people ,because whether we like it or not ,it is reality.

      You gave a No. 1 hit.

      Considering that people will fight as the markets do ,(bulls and bears) , (long and short) ,(Samaras and Tsipras) and that consolidation of price is the behaviour of choice due to indecision in this days ,we need a breakout ,that has 50-50 chance of going either way.

      Either ,when nearing the elections ,we get more data or not ,i side with the people of change.

      If it is Samaras to appear of having the probability of forming a government or of atleast being the first ,i may vote the flexible Dim. Ar..

      If it is for Tsipras to have the bigger chance ,i vote for Syriza.

    • @Dean: I find your support for Samaras and ND to be touching, but completely foolish. There is no evidence that Samaras is anti-memorandum (or pro-memorandum, for that matter). Consistently he has played an ambiguous role, with no policy direction, because all he is interested in is gaining power. This is the worst type of politician to have in a crisis — another of that type was Papandreou — and the majority of Greeks, unlike you, seem to have worked that out.

      As far as Tsipras is concerned, I repeat what I wrote earlier (and you ignored): Merkel and her cronies are politically on the way out. Their time is about to end, and a new era should emerge: if it does not, there will no longer be democracy in Europe. That scenario is too awful to accept, and I prefer not to speculate on its potential.

  43. Thanks for a well-thoughtout article. I have been a proponent of Greece defaulting and leaving the eurozone (but staying in the E.U.) but must confess to considerable cold feet. And your point about the level of commodity export in Argentina’s rebound is well taken, as it seemed to me that Weisbrot et. al’s estimate of the size of Argentine agricultural exports seemed low to me given Argentina’s strength as a food exporter.

    Nonetheless, I think their point about investment being critical to the recovery is sound, and Argentina renouncing its odious debt is what freed up funds for investment. Greece does have less room to maneuver than did Argentina a decade ago, nor does it have the same manufacturing and agricultural strengths. What I think that means is that there is no Greek solution to Greece’s crisis, only a European-wide or international solution.

    Greece can default and stay within the E.U., but doing it while retaining the euro seems to me something of a contradiction, other than as the implicit challenge to the E.U. daring it to kick out Greece. Argentina’s experience has relevance for Greece and other countries undergoing austerity (http://wp.me/p2cpPS-1u) but just how much is difficult to say, given the different times and circumstances.

    Whether is to happen should happen next month, so we will soon begin to know the answers. Whatever Greeks decide, they will need plenty of solidarity from working people elsewhere.

    • Well, it was not me. I was asked what I thought about the idea and told then=m it was ludicrous…

    • It’s typical American crap. As a Brit, I am familiar with the former colony telling us how quaint the British Royal Family is. I find them neither quaint nor tolerable: the only saving grace is that they are better-behaved than former UK prime ministers such as Blair. I shudder to think of President Blair (which he tried to impose via the European Union). I suppose the analogy would be King Bush…

    • Why not? :)

      That would be a strange and unique solution ,not to mention that the Americans can then play the good cop more efficiently and also exploit oil and gas deals.

      But then again ,coudn’t we do the same with another foreign currency? Russian maybe?

    • I only wish… (For if they paid me to call them misanthropic and idiots, it would be such a feat!)

  44. “To begin with, Greece must exit not only the Eurozone but also the European Union. This is non-negotiable and unavoidable.” That’s total bullshit, taken from a European Commission blackmailing statement. There are no rules and no precedent for an exit from the Euro, but there is by no means an automatism that it would mean exit from the EU.

    • You clearly did not read my piece in full. Staying in the EU will allow Greek citizens to take the Greek govt to the European Courts and win. This is why exiting one means exiting the other.

    • The formal legal position that the Commission has taken is in accord with a legal advisory document of the ECB, written by its legal experts. They conclude that there is no mechanism for a country to be removed, or to remove itself the eurozone. This would therefore require a Treaty amendment, which is more or less impossible.

      Therefore, from a legal point of view, Greece cannot be removed from the eurozone and can remove itself only by quitting the European Union and re-applying.

      Obviously, it is out of the question to Greece to do this unless it is being starved of liquidity and forced into that position as an alternative to socio-economic chaos akin to civil war.

  45. You raise a number of points some of which have strong (to me) counterarguments:

    1) Speaking of little space for export-led growth, you seem to discount import substitution, where there seems to be ample space for shock absorbing (and lots of currently under-utilised productive capacity).

    2) On the delay issue (a technical obstacle) I can think of several non-standard ways to overcome the technicalities of the transition in a matter of days. On the bifurcation, I don’t get how it is all different from the Good Old Times, when we had the drachma and everybody had savings in gold liras, dollar etc, or immigrants returned to Greece with their hard-won savings in DMs.

    3) This is the real burrito, I admit. However, a line should be drawn, shouldn’t it? I mean, if the Greek financial and payment systems collapse, what will we be able to do (or care to do) about the rest of the EZ, or even membership in EU (subsidies and all included)?

    Yet, the basic issue, that many economists seem to ignore so far (including you, as well as Krugman and Weisbrot) is that of private debt. Even if your Modest Proposal is fully implemented in the EZ (and Greek banks are recapitalized by EFSF) will that restore the price of assets (houses, stocks, business revenues) and labor IN GREECE, to be able to sustain the amount of private debt out there, without massive private-sector insolvency? Or is Greece going to become the Mexico of EU?

    Until there are viable answers to this issue (and I wish that you may correct me on that the ModProp _gives_ an answer), I will vote for a nationally managed currency.

    To phrase it in terms of your recent critique of Greek political ideologues, I as a (paleo-)liberal couldn’t have said it better than my guru (:-) Thomas Jefferson:

    “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    (Btw, is there a modern-economics counter-argument to TJ? I would love to see one –hint, hint).

    • The main technical question I see Is how to avoid hoarding of euro bills during the tansition period. It musn’t be so difficult, although some kind of corralito for a brief period is unavoidable. What makes more damage, a short corralito or a long internal devaluation. Mr. Varoufakis should address this question.

  46. Regarding Point 1: Isn’t the “speedy decline” of the Greek shipping and tourism industries going to lead to an “underutilisation of productive resources whose employment can, potentially, produce goods and services for which there is effective demand”? I mean, all these ships and hotels won’t go away, Greece isn’t any less beautiful now than it was before the crisis, and shipping is a global, rather than a local business in which greater competitiveness may come in useful.

    • Pedro:

      You should know by now that this is the direct result of the German Grexit propaganda.

      1. Every time Merkel(or the German press for this matter) speaks of Grexit , the Greeks run to their banks and lift whatever is left. This in turn makes the German/EU cost of rescue higher because the ensuing aid packages need to be higher to cover such unfoseen/non-budgeted costs .

      2. Concurrently, every time Merkel speaks of Grexit there is an immediate Greek voter response to the left, which means that the eventual damage will be greater for Germany to rectify.

      So, far the German strategy has been to theaten a euro exit, knowing that 70%+ of Greeks want to stay in the euro.

      This strategy does not work anymore, because it has the opposite effect of increasing eventual costs to German.

      Chess players call such a check mate. Merkel has been self-defeated by none other than a street kid who rides a German bike.

    • And if a car accident in Athens happens it is also the fault of Germany?

    • @ No EU dictatorship

      Totally out of this world question.
      We try to find the energy flows (Greek ,German ,whatever) for actions taken ,you just accuse.
      Feeling a bit defensive?

      No it is all our fault because we are geniuses. It is all a Greek plan.
      We sacrifice our people for the higher ideal of insulting Merkel.

    • If yout house would be in order there would be no opportunity for insults. But with a state “organized” like an African country, one has to question if this country should be member of a “union” that thinks of itself to be in the premier league. It´s like Somalia and Switzerland in the same currency…

    • @ No EU dictatorship

      And who are the ones that begun to insult ,exploit ,manipulate?

      My house is not in order and that is a fact.
      It does not affect you.

      There is corruption and that is a fact.
      German business in Greece is the biggest force and that is a fact.

      We do not belong in the Eurozone because obviously you can not act honestly and want to manipulate everybody.

      It seems you only want democracy in Greece to prevail with the possibility of Euro disintegration ,so that Germany uses its power in worst parasitic ways.
      You just love to see a whole nation go down and vast differences between countries like Somalia and Switzerland to exist.

      Well guess what.
      You may have technology and power due to a parasitic economy but we hold the hearts of people all over the world in our palms.
      And this power of ours…… has no systemic problems.

    • @ No EU dictatorship

      It is only the hand of fate that gave power to Germany and America in the previous century. This will change soon ,your time will come ,for except the Greek nation ,nothing lasts for ever.

      Your own government hurts you in the worst mental and spiritual way. Like a manipulative mafiozo who tries to keep her kid happy ,being in the dark. Maybe you like it!

      Your “union” is a premier league of parasites.
      Our Europe is the higher ideal.

      Either reform or get out.

    • This is not my union. My union would be a pure free trade zone, like in North America. The whole political bull in Brussels was sneeked in quietely

      “You just love to see a whole nation go dow”
      No. I just like to If it means going down from a level of spending borrowed money to a level that is equal toliving by its means, certainly yes!

      “vast differences between countries like Somalia and Switzerland to exist.. ”

      Yes! Differences are a good thing. Otherwise we would have socialism and noone would try to work harder (or organize better as in the case of Greece).

    • @ No EU dictatorship

      When you say pure free trade i hope you do not mean totally anarchic (using the “bad” notion – not the respectful political notion).

      And i would like to see nations going down when their powers were not acquired honestly. But i do not want to see people getting hurt.

      Differences are a good think. Vast differences are not. They are impossible by nature. The only way vast differences can exist is by human interference. Well ,it sure wasn’t the habits of the Greeks or their alternatives to survive against their own government ,that created these unhealthy and unnatural differences.

    • How can someone who has had corrupt governments for his lifetime prefer government over private initiative?

    • Oh no ,not governments but better organisation and procedures of control with the people being responsible.

      That is why i made the distinction between the “no principles” notion of the word anarch and the political notion.

      Whatever one does ,one needs to have checking points ,control. Not authoritative control.
      You see ,for me anarchy is respect for the human being and democracy is the communicational procedures between anarchs.

      When it comes to transactions that may affect everybody ,mechanisms must be in place to observe the flow of energy and multilateral controls (many different minds observing the same flow) to assure the transparency and honesty of the transactions. A mechanism known by all and all taking part in that mechanism ,without being slaves of the mechanism. A mechanism that advances morality ,because everyone knows and understands that it leads to prosperity for all while allowing individuals to use their potentials freely.

      I like the proposal of Chris Coles for something like that.

  47. I agree completely, Yani. The structural similarities with Argentina’s default are imaginary. Partly through its own economic weaknesses, but mainly because of the very nature of eurozone membership, Greece would embark on a near-suicidal journey by quitting the euro now. Of course, if the euro collapses then the situation would be less bad (although still bad) for Greece.

  48. “And use our readiness to default as a bargaining strategy by which to bring about a New Deal for Europe ”

    Nice euphemism for ‘let’s blackmail our creditors even further’. Thanks for the clarification…

    Greece cheated her way into the eurozone, was never fit to be there, isn’t fit, and will probably never be, judging from what Greece has shown during the past decades. There is no justified hope that Greece will change.

    So forget all the poiltical blabla and economic theorizing, since the only relevant question is: whether Greece stays in the eurozone or not, what standard of living are other nations (mainly the eurozone core countries) prepared to fund (w/o ever getting the money back, that’s for sure).

    • Wow. It is amazing to see how you choose to translate one sentence.
      Is Merkel paying you? Diplomatic tricks are only good for the Germans?

      You people (the likes of you) will never be real democrats. Hypocrites.
      Learn from your fellow citizens that do not accept the mischievous (to be just a bit polite) doings of your own corrupted government.

  49. Watching this all unfold from Australia, it is like watching an ice cube slowing melting in the sun. You know the ice cube will eventually melt if it is not placed back in a cold place, but know it never will be until it is just a pool of water.

  50. Good afternoon from Athens Yani. I’ d like to read a comment of you upon M. Millers and R. Skidelsky’s article in Financial Times “How Keynes would solve the eurozone crisis – An orderly exit from the euro is the best option for Greece”. Although I disagree with the latter, as you do, the former is quite encouraging. At last there seems to be an agreement that the problem is not about Economy but about Political Economy and its impact on Social Economy. Let’s make every effort so that Rationality prevails, despite the so far misjudgements of the dominant european policemakers mentioned by W. Münchau.

    • Of course I meant “policymakers”, although sometimes “γλώσσα λανθάνουσα τ’ αληθή λέγει”! (I’ m waiting an inspired translantion in english from you Yani)

  51. Good afternoon from Athens Yani. I’d like to have a comment of you upon M. Miller’s and R. Skidelsky’s article in Financial Times “How Keynes would solve the eurozone crisis – An orderly exit from the euro is the best option for Greece”.

  52. For months now, i shout to you for an article of yours about drahma and plan B. Of course to be fair, i should have expected that from your economic opponents.The critique you hold here is the same you have been arguing two years now, but now all included in one article!

    Although, i am in favor of Greece’s exit out of Eurozone, I am terrified by the fact that i can see no government with plan and vision of a new Greece. Which is utterly important for the successful outcome of such move. What i mean by saying “government with plan and vision” is a government giving convincing answers to your key points for starters. I wish these three points of yours was the main issue of a pre-election debate.
    Please write an article in protagon about it.

    Enough of rhetoric speeches and impression games. As Lygeros say ( i don’t know if it’s his own thought) μόνο η ουσία νικάει την εξουσία.

    I think that successful answers can be given to your questions, though obviously they won’t be in the same framework of Iceland and Argentina.
    But unless i hear them, it’s difficult to argue against you points.
    Especially about your 2nd difference, my firm belief is that it will be exactly as you say it, if not worse.
    As far as your 3rd difference, it’s the rest of the Europe that seriously has to think about it. Enough with them. (What i perfectly sound argument !?!)
    At least Greece has the capacity to feed its people if governed fairly.

    If you think of the 2nd argument as a technical difficulty to be answered, then your first argument needs a sound plan and your 3rd argument excellent knowledge of global financing and conceptual capabilities on behalf of the ruling party(?).

    From what i can see. Tsipras’s logic is more close to your logic. BUT i am afraid they don’t have the intellectual abilities and the think tank to stand firmly within this logic for months. And it’s going to take months before such α plan is pulled off . It’s going to be difficult for Tsipras to convince Greeks that their sacrifices and efforts will be towards a better Europe. Greeks are in favor of Europe mostly due to fear of the “unknown”, it’s not an educated option in my opinion. They will support a government that will show with actions that cares about the interests of Greeks, not Europe. They will exhibit great discomfort if such measures are passed upon this logic. Let’s See.

    Given i talked about dinosaurs in my last post. Exit Dragasakis out of Greece. T-Rex.

  53. “For if the Greek state is effectively to confiscate the few euros a citizen has in her bank account and turn them into drachmas of diminishing value, she will be able to take the Greek government to the European Courts and win outright. Additionally, the Greek state will have to introduce border and capital controls to prevent the export of its citizens euro-savings. Thus, Greece will have to get out of the European Union.”

    I don’t agree. There are situations that any country can announce “State of emergency” according to International Law and justify such actions and protect itself.

    • Yes, I have been discussing this today with some friends. I argued that since France and others have unilaterally derogated short-term on the free movement of persons under the Schengen Border Code, then it is perfectly acceptable for any country to restrict free movement of capital flows on a temporary basis to protect its banking system. As you mention, temporary derogation from international treaties (and implicitly EU treaties) is permitted in extremis.

      The only really big problem with this is that outflows from the Greek banks have been so extensive, and future ones likely to continue over extended periods, that it would need long-term restrictions on capital movements. These would not be covered by a state of emergency derogation, and would lead automatically to Commission proceedings for breach of the European Union Treaties (and ultimately the threat of expulsion from the EU).

  54. Pingback: Links 5/16/12 « naked capitalism

  55. Although i agree with the 2nd and 3rd differences i have an objection about the 1st difference.

    You say “it is crucial to note that Argentina’s export potential in 2001 was vastly superior to that of Greece’s in 2012. ”

    http://tinyurl.com/cqjmo96
    http://tinyurl.com/bwxdqkg

    On the 1st link there is a graph showing Argentina’s output gap for 2001.
    On the 2nd link there is a graph showing Greek output gap up to date.
    Argentina’s output gap was somewhat over -15% while the Greek output gap seems to be around -17% and growing.Thus i have to wonder where do you base this opinion while not only our exports contribute a much higher % in our GDP but our output gap seems to be even larger than that of Argentina back in 2001.

  56. HI Yanis,

    few days according to Der Spiegel and sources of the German federal department of finance. even if Greece leaves the Euro, EU funding will not be cut, however, of course there is a rub.

    All the funding that would help the Greece budget, hence citizens, would be cut to zero, but not the billions that are used to re pay bondholders, now mainly ECB.

    450 million Euro were paid out to bondholders, under british law, just yesterday.

    I am afraid that the political system at the core in Europe is too inept to seriously consider any other possibility that the one they already pursue since 5 years, or put it this way, the political process in Europe is broken, it is not longer a democratic process, but a totalitarian dictate.

    What the pubic is presented from the stage, and channeled through the controlled media is nothing but a smoke screen, a talking shop to project a fatamorgana of democracy onto the horizon and HD screens in living rooms.

    The real players acting behind the curtains and issuing orders, every country has them, like we in Ireland have Goldman Sachs Peter Sutherland and others.

    In the the Club of Rome report 2052 that was launched last week a Argentine Investment manager stated that the triumph of the financial capitalist industry will be the downfall of the West, and a Austrian Historian expects revolutions around 2020, and he compared the situation with 1848, not too bad a comparison, if we consider what we witness to be the reimplementation of quasi feudalist structures.

    All my best
    Georg

    • Για σου Γιάννη. Πρώτη φορά παίρνω το θάρρος να σου απευθυνθώ(παρότι συνεπής αναγνώστης των άρθρων σου τα τελευταία 2 χρόνια) και θα ήθελα να σε ρωτήσω το εξής. Ποια ήταν η προσέγγιση σου, 10 χρόνια πριν, όσον αφορά την είσοδο της Ελ. στην ευρωζώνη; Περιμένω την απάντηση σου με ενδιαφέρον.
      Χαιρετισμούς από την συμπρωτεύουσα!

    • “What the pubic is presented from the stage”

      I hope Merkel does not do that! She would scare everybody with her pubic!

    • “Δεσμεύομαι να απαντήσω…”

      Haha. Please no such expressions. :)
      Did some politician bite you? You should be careful. Do you need an antidote? Do we all need?

    • Dimitris, Yanis,

      just in case, should you have responded to my thoughts, I speak or read as much Greek as my dog plays chess, none. ;)

      Best
      Georg

    • @ Baumann

      Dimitris in green asked Yannis to write an article about his views about EU before Greece entered EZ. And Yannis answered that he is bound to give him an answer in the future. Then Dimitris in red, joked referring to Yanis that he responded as a politician?!(LOL).

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